Se 


ee ee nn ee 


DUKE UNIVERSITY LIBRARY 


DURHAM, N.C. 


a0 ge ee 


THE PLACE OF SCIENCE 
IN 


MODERN CIVILISATION 
AND OTHER ESSAYS 


by 
THORSTEIN VEBLEN 


NEW YORK THE VIKING PRESS, INC. MCMxxx 


COPYRIGHT, 1919 
BY B. W. HUEBSCH 


FIRST PRINTING, DECEMBER 1919 
SECOND PRINTING, OCTOBER 1930 


PRINTED IN THE UNITED STATES OF AMBRIOA 


Bude 4 os < wk 
tr yi; 
S offs. oe 
#2.\: % \ Sg 
PUBLISHER’S NOTE tR- * 


These essays are here reprinted from various periodi- 
cals, running over a period of about twenty years. The 
selection is due to Messrs. Leon Ardzrooni, Wesley C. 
Mitchell and Walter W. Stewart. 

It is unlikely that more than a few public libraries 
possess files so complete as to give access to all of these 
essays, and even if the magazines were readily obtainable 
at libraries they would almost certainly have to be read 
in those institutions. The nature of the material, its 
timeliness (Mr. Veblen deals with ideas in such a manner 
as to give the date of composition a secondary impor- 
tance), and the fact that it would otherwise be lost to 
all save diligent excavators, explain its preservation in 
this form. 

The courtesy of the periodicals in which the papers 
first appeared, in permitting their reproduction, is grate- 
fully acknowledged. 


17037 


CONTENTS 


Tue PLACE OF SCIENCE IN MODERN CIVILISATION . 
Tue EvoLuTION OF THE SCIENTIFIC POINT OF VIEW 
Wuy Is Economics Not AN EvoLuTIONARY SCI- 


DUCT CIB SS Neen ee ec Silene bio Sys 

THE PRECONCEPTIONS OF Economic SciENcE. I. 
‘a a ¥ . i II. 
S 2 co . III. 
Prorrssor CLARK'S EcONOMICS .° . SC. 
Tue LIMITATIONS OF MARGINAL UTILITY . . 
Gustav SCHMOLLER’s ECONOMICS .... . 
INDUSTRIAL AND PECUNIARY EMPLOYMENTS. . . 
meen NATURE of CaApiITar. I. 9.) 0.0. . 

ey then a c § II. 
Some NEGLECTED POINTS IN THE THEORY OF SO- 


cos ETE Oe itn SR aa ores TE Se 
Tue SocraLtist Economics oF Kart Marx. I. 

S Fa 4) AEC bes if ED. 
Tue MuTATION THEORY AND THE BLOND RACE . 
THE BLOND RACE AND THE ARYAN CULTURE. . 
AN EarLy EXPERIMENT IN TRUSTS . . .. . 


PAGE 
I 


32 


56 

82 
114 
148 
180 
231 
252 
279. 
324 
352 


387 
409 
431 
457 
477 
497 - 


THE PLACE OF SCIENCE IN MODERN 
CIVILISATION * 


It is commonly held that modern Christendom is superior 
to any and all other systems of civilised life. Other ages 
and other cultural regions are by contrast spoken of as 
lower, or more archaic, or less mature. The claim is that 
the modern culture is superior on the whole, not that it is 
the best or highest in all respects and at every point. It 
has, in fact, not an all-around superiority, but a superi- 
ority within a closely limited range of intellectual activi- 
ties, while outside this range many other civilisations sur- 
pass that of the modern occidental peoples. But the 
peculiar excellence of the modern culture is of such a 
nature as to give it a decisive practical advantage over all 
other cultural schemes that have gone before or that have 
come into competition with it. It has proved itself fit to 
survive in a struggle for existence as against those civilisa- 
tions which differ from it in respect of its distinctive 
traits. 

Modern civilisation is peculiarly matter-of-fact. It 
contains many elements that are not of this character, but 
these other elements do not belong exclusively or charac- 
teristically to it. The modern civilised peoples are in a 
peculiar degree capable of an impersonal, dispassionate 

. insight into the material facts with which mankind has to 
deal. The apex of cultural growth is at this point. 
Compared with this trait the rest of what is comprised in 
the cultural scheme is adventitious, or at the best it is a 


ba Reprinted by permission from The American Journal of So- 
ctology, Vol. XI, March, 1906. 
I 


2 The Place of Science 


by-product of this hard-headed apprehension of facts. 
This quality may be a matter of habit or of racial endow- 
ment, or it may be an outcome of both; but whatever be 
the explanation of its prevalence, the immediate conse- 
quence is much the same for the growth of civilisation. 
A civilisation which is dominated by this matter-of-fact 
insight must prevail against any cultural scheme that lacks 
this element. This characteristic of western civilisation 
comes to a head in modern science, and it finds its highest 
material expression in the technology of the machine in- 
dustry. In these things modern culture is creative and 
self-sufficient ; and these being given, the rest of what may 
seem characteristic in western civilisation follows by easy 
consequence. The cultural structure clusters about this 
body of matter-of-fact knowledge as its substantial core. 
Whatever is not consonant with these opaque creations of 
science is an intrusive feature in the modern scheme, bor- 
rowed or standing over from the barbarian past. 

% Other ages and other peoples excel in other things and 
are known by other virtues. In creative art, as well as in 
critical taste, the faltering talent of Christendom can at 
the best follow the lead of the ancient Greeks and the 
Chinese. In deft workmanship the handicraftsmen of 
the middle Orient, as well as of the Far East, stand on a 
level securely above the highest European achievement, 
old or new. In myth-making, folklore, and occult sym- 
bolism many of the lower barbarians have achieved things 
beyond what the latter-day priests and poets know how to 
propose. In metaphysical insight and dialectical versa- 
tility many orientals, as well as the Schoolmen of the 
Middle Ages, easily surpass the highest reaches of the 
New Thought and the Higher Criticism. In a shrewd 
sense of the religious verities, as well as in an unsparing 
faith in devout observances, the people of India or Thibet, 


The Place of Science 3 


or even the medieval Christians, are past-masters in com- 
parison even with the select of the faith of modern times. 
In political finesse, as well as in unreasoning, brute loy- 
alty, more than one of the ancient peoples give evidence of 
a capacity to which no modern civilised nation may aspire. 
In warlike malevolence and abandon, the hosts of Islam, 
the Sioux Indian, and the “ heathen of the northern sea ” 
have set the mark above the reach of the most strenuous 
civilised warlord. 

To modern civilised men, especially in their intervals of 
sober reflection, all these things that distinguish the bar- 
barian civilisations seem of dubious value and are required 
to show cause why they should not be slighted. It is not 
so with the knowledge of facts. The making of states 
and dynasties, the founding of families, the prosecution of 
feuds, the propagation of creeds and the creation of sects, 
the accumulation of fortunes, the consumption of super- 
fluities — these have all in their time been felt to justify 
themselves as an end of endeavor; but in the eyes of 
modern civilised men all these things seem futile in com- 
parison with the achievements of science. They dwindle 
in men’s esteem as time passes, while the achievements of” 
science are held higher as time passes. This is the one 
secure holding-ground of latter-day conviction, that “ the 
increase and diffusion of knowledge among men ” is inde- 
feasibly right and good. When seen in such perspective 
as will clear it of the trivial perplexities of workday life, 
this proposition is not questioned within the horizon of 
the western culture, and no other cultural ideal holds a 
similar unquestioned place in the convictions of civilised 
mankind. 

On any large question which is to be disposed of for 
good and all the final appeal is by common consent taken 
to the scientist. The solution offered in the name of sci- 


4 The Place of Science 


ence is decisive so long as it is not set aside by a still more 
searching scientific inquiry. This state of things may not 
be altogether fortunate, but such is the fact. There are 
other, older grounds of finality that may conceivably be 
better, nobler, worthier, more profound, more beautiful. 
It might conceivably be preferable, as a matter of cultural 
ideals, to leave the last word with the lawyer, the duelist, 
the priest, the moralist, or the college of heraldry. In 
past times people have been content to leave their weighti- 
est questions to the decision of some one or other of these 
tribunals, and, it cannot be denied, with very happy results 
in those respects that were then looked to with the greatest 
solicitude. But whatever the common-sense of earlier 
generations may have held in this respect, modern com- 
mon-sense holds that the scientist’s answer is the only 
ultimately true one. In the last resort enlightened 
common-sense sticks by the opaque truth and refuses to 
go behind the returns given by the tangible facts. 
~ Quasi lignum vitae in paradiso Dei, et quasi lucerna 
fulgoris in domo Domini, such is the place of science in 
modern civilisation. »,This latterday faith in matter-of- 
fact knowledge may be well grounded or it may not. It 
has come about that men assign it this high place, perhaps 
idolatrously, perhaps to the detriment of the best and most 
intimate interests of the race. There is room for much 
more than a vague doubt that this cult of science is not 
altogether a wholesome growth—that the unmitigated 
quest of knowledge, of this matter-of-fact kind, makes for 
race-deterioration and discomfort on the whole, both in its 
immediate effects upon the spiritual life of mankind, and 
in the material consequences that follow from a great 
advance in matter-of-fact knowledge. 

But we are not here concerned with the merits of the 
case. The question here is: How has this cult of science 


The Place of Science 5 


arisen? What are its cultural antecedents? How far 
is it in consonance with hereditary human nature? and, 
What is the nature of its hold on the convictions of 
civilised men? 


In dealing with pedagogical problems and the theory of 
education, current psychology is nearly at one in saying 
that all learning is of a “pragmatic” character; that 
knowledge is inchoate action inchoately directed to an 
end; that all knowledge is * functional”; that it is of the 
nature of use. This, of course, is only a corollary under 
the main postulate of the latter-day psychologists, whose 
catchword is that The Idea is essentially active. There is 
no need of quarreling with this “pragmatic” school of 
psychologists. Their aphorism may not contain the whole 
truth, perhaps, but at least it goes nearer to the heart of 
the epistemological problem than any earlier formulation. 
It may confidently be said to do so because, for one thing, 
its argument meets the requirements of modern science. 
It is such a concept as matter-of-fact science can make 
effective use of; it is drawn in terms which are, in the 
last analysis, of an impersonal, not to say tropismatic, 
character; such as is demanded by science, with its in- 
sistence on opaque cause and effect. While knowledge is 
construed in teleological terms, in terms of personal inter- 
est and attention, this teleological aptitude is itself reduci- 
ble to a product of unteleological natural selection. The 
teleological bent of intelligence is an hereditary trait 
settled upon the race by the selective action of forces that 
look to no end. The foundations of pragmatic intelli- 
gence are not pragmatic, nor even personal or sensible. 

This impersonal character of intelligence is, of course, 
most evident on the lower levels of life. If we follow 
Mr. Loeb, e, g., in his inquiries into the psychology of 


6 The Place of Science 


that life that lies below the threshold of intelligence, what 
we meet with is an aimless but unwavering-motor response 
to stimulus.?, The response is of the nature of motor im- 
pulse, and in so far it is “ pragmatic,” if that term may 
fairly be applied to so rudimentary a phase of sensibility. 
The responding organism may be called an “ agent ” in so 
far. It is only by a figure of speech that these terms are 
made to apply to tropismatic reactions. Higher in the 
scale of sensibility and nervous complication instincts 
work to a somewhat similar outcome. «On the human 
plane, intelligence (the selective effect of inhibitive com- 
plication) may throw the response into the form of a rea- 
soned line of conduct looking to an outcome that shall 
be expedient for the agent. This is naive pragmatism of 
the developed kind. There is no longer a question but 
that the responding organism is an “agent” and that 
his intelligent response to stimulus is of a teleological 
character. But that is not all. The inhibitive nervous 
complication may also detach another chain of response 
to the given stimulus, which does not spend itself in a line 
of motor conduct and does not fall into a system of uses. 
Pragmatically speaking, this outlying chain of response is 
unintended and irrelevant. Except in urgent cases, such 
an idle response seems commonly to be present as a sub- 
sidiary phenomenon. If credence is given to the view 
that intelligence is, in its elements, of the nature of an 
inhibitive selection, it seems necessary to assume some 
such chain of idle and irrelevant response to account for 
the further course of the elements eliminated in giving 
the motor response the character of a reasoned line of 
conduct. So that associated with the pragmatic atten- 
tion there is found more or less of an irrelevant atten- 


(73 


2 Jacques Loeb, Heliotropismus der Thiere, and Comparative 
Psychology and Physiology of the Brain. 


The Place of Science i 


tion, or idle curiosity. This is more particularly the case 
where a higher range of intelligence is present. This idle 
curiosity is, perhaps, closely related to the aptitude for 
play, observed both in man and in the lower animals.° 
The aptitude for play, as well as the functioning of idle 
curiosity, seems peculiarly lively in the young, whose 
aptitude for sustained pragmatism is at the same time 
relatively vague and unreliable. 

This idle curiosity formulates its response to stimulus, 
not in terms of an expedient line of conduct, nor even 
necessarily in a chain of motor activity, but in terms of 
the sequence of activities going on in the observed phe- 
nomena. The “interpretation” of the facts under the 
guidance of this idle curiosity may take the form of 
anthropomorphic or animistic explanations of the ‘“ con- 
duct” of the objects observed. The interpretation of 
the facts takes a dramatic form. The facts are conceived 
in an animistic way, and a pragmatic animus is imputed 
to them. Their behavior is construed. as a reasoned 
procedure on their part looking to the advantage of these 
animistically conceived objects, or looking to the achieve- 
ment of some end which these objects are conceived to 
have at heart for reasons of their own. 

Among the savage and lower barbarian peoples there 
is commonly current a large body of knowledge organised 
in this way into myths and legends, which need have no 
pragmatic value for the learner of them and no intended 
bearing on his conduct of practical affairs. They may 
come to have a practical value imputed to them as a 
ground of superstitious observances, but they may also 
not.* All students of the lower cultures are aware of 


3Cf. Gross, Spiele der Thiere, chap. 2 (esp. pp. 65-76), and 
chap. 5; The Play of Man, Part III, sec. 3; Spencer, Principles of 
Psychology, secs. 533-35. 

4The myths and legendary lore of the Eskimo, the Pueblo 


8 The Place of Science 


the dramatic character of the myths current among these 
peoples, and they are also aware that, particularly among 
the peaceable communities, the great body of mythical 
lore is of an idle kind, as having very little intended bear- 
ing on the practical conduct of those who believe in these 
myth-dramas. The myths on the one hand, and the work- 
day knowledge of uses, materials, appliances, and expe- 
dients on the other hand, may be nearly independent of 
one another. Such is the case in an especial degree | 
among those peoples who are prevailingly of a peaceable 
habit of life, among whom the myths have not in any 
great measure been canonised into precedents of divine 
malevolence. 

The lower barbarian’s knowledge of the phenomena of 
nature, in so far as they are made the subject of delib- 
erate speculation and are organised into a consistent body, 
is of the nature of life-histories. This body of knowl- 
edge is in the main organised under the guidance of an 
idle curiosity. In so far as it is systematised under the 
canons of curiosity rather than of expediency, the test 
of truth applied throughout this body of barbarian knowl- 
edge is the test of dramatic consistency. In addition to 
their dramatic cosmology and folk legends, it is needless 
to say, these peoples have also a considerable body of 
worldly wisdom in a more or less systematic form. In 
this the test of validity is usefulness.® 


Indians, and some tribes of the northwest coast afford good in- 
stamces of such idle creations. Cf. various Reports of the Bu- 
reau of American Ethnology; also, e. g., Tylor, Primitive Culture, 
esp. the chapters on “ Mythology” and “ Animism.” 

5“ Pragmatic” is here used in a more restricted sense than 
the distinctively pragmatic school of modern psychologists would 
commonly assign the term. ‘“ Pragmatic,” “teleological,” and the 
like terms have been extended to cover imputation of purpose as 
well as conversion to use. It is not intended to criticise this 
ambiguous use of terms, nor to correct it; but the terms are 


The Place of Science a) 


The pragmatic knowledge of the early days differs 
scarcely at all in character from that of the maturest 
phases of culture. Its highest achievements in the di- 
rection of systematic formulation consist of didactic ex- 
hortations to thrift, prudence, equanimity, and shrewd 
‘management — a body of maxims of expedient conduct. 
In this field there is scarcely a degree of advance from 
Confucius to Samuel Smiles. Under the guidance of the 
idle curiosity, on the other hand, there has been a con- 
tinued advance toward a more and more comprehensive 
system of knowledge. With the advance in intelligence 
and experience there come closer observation and more 
detailed analysis~of—facts:*--Thedramatisation of the 
sequence of phenomena may then fall into somewhat less 
personal, less anthropomorphic formulations of the proc- 
esses observed; but at no stage of its growth — at least 
at no stage hitherto reached — does the output of this 
work of the idle curiosity lose its dramatic character. 
Comprehensive generalisations are made and cosmologies 
are built up, but always in dramatic form. General prin- 
ciples of explanation are settled on, which in the earlier 
days of theoretical speculation seem invariably to run back 
to the broad vital principle of generation. Procreation, 
birth, growth, and decay constitute the cycle of postu- 
lates within which the dramatised processes of natural 
phenomena run their course. Creation is procreation in 
these archaic theoretical systems, and causation is gesta- 


here used only in the latter sense, which alone belongs to them 
by force of early usage and etymology. “Pragmatic” knowl- 
edge, therefore, is such as is designed to serve an expedient end © 
for the knower, and is here contrasted with the imputation of 
expedient conduct to the facts observed. The reason for pre- 
serving this distinction is simply the present need of a simple 
term by which to mark the distinction between worldly wisdom 
and idle learning. 
6 Cf. Ward, Pure Sociology, esp. pp. 437-48. 


ite) The Place of Science 


tion and birth. The archaic cosmological schemes of 
Greece, India, Japan, China, Polynesia, and America, all 
run to the same general effect on this head.” The like 
seems true for the Elohistic elements in the Hebrew scrip- 
tures. 

Throughout this biological speculation there is present, 
obscurely in the background, the tacit recognition of a 
material causation, such as conditions the vulgar opera- 
tions of workday life from hour to hour. But this causal 
relation between vulgar work and product is vaguely 
taken for granted and not made a principle for compre- 
hensive generalisations. It is overlooked as a trivial mat- 
ter of course. The higher generalisations take their 
color from the broader features of the current scheme of 
life. The habits of thought that rule in the working-out 
of a system of knowledge are such as are fostered by 
the more impressive affairs of life, by the institutional 
structure under which the community lives. So long as 
the ruling institutions are those of blood-relationship, 
descent, and clannish discrimination, so long the canons 
of knowledge are of the same complexion. 

When presently a transformation is made in the scheme 
of culture from peaceable life with sporadic predation to 
a settled scheme of predaceous life, involving mastery 
and servitude, gradations of privilege and honor, coercion 
and personal dependence, then the scheme of knowledge 
undergoes an analogous change. The predaceous, or 
higher barbarian, culture is, for the present purpose, 
peculiar in that it is ruled by an accentuated pragmatism. 
The institutions of this cultural phase are conventional- 
ised relations of force and fraud. The questions of life 
are questions of expedient conduct as carried on under 
the current relations of mastery and subservience. The 


7C£, e.g. Tylor, Primitive Culture, chap. 8. 


The Place of Science II 


habitual distinctions are distinctions of personal force, 
advantage, precedence, and authority. A shrewd adap- 
tation to this system of graded dignity and servitude be- 
comes a matter of life and death, and men learn to think 
in these terms as ultimate and definitive. The system 
of knowledge, even in so far as its motives are of a dis- 
passionate or idle kind, falls into the like terms, because 
such are the habits of thought and the standards of dis- 
crimination enforced by daily life.® 

The theoretical work of such a cultural era, as, for in- 
stance, the Middle Ages, still takes the general shape of 
dramatisation, but the postulates of the dramaturgic 
theories and the tests of theoretic validity are no longer 
the same as before the scheme of graded servitude came 
to occupy the field. The canons which guide the work 
of the idle curiosity are no longer those of generation, 
blood-relationship, and homely life, but rather those of 
graded dignity, authenticity, and dependence. The higher 
generalisations take on a new complexion, it may be with- 
out formally discarding the older articles of belief. The 
cosmologies of these higher barbarians are cast in terms 
of a feudalistic hierarchy of agents and elements, and 
the causal nexus between phenomena is conceived ani- 
mistically after the manner of sympathetic magic. The 
laws that are sought to be discovered in the natural uni- 
verse are sought in terms of authoritative enactment. 
The relation in which the deity, or deities, are conceived to 
stand to facts is no longer the relation of progenitor, so 
much as that of suzerainty. Natural laws are corollaries 
under the arbitrary rules of status imposed on the natural 
universe by an all-powerful Providence with a view to 
the maintenance of his own prestige. The science that 
grows in such a spiritual environment is of the class 


8 Ci. James, Psychology, chap. 9, esp. sec. 5. 


12 The Place of Science 


represented by alchemy and astrology, in which the -im- 
puted degree of nobility and prepotency of the objects and 
the symbolic force of their names are looked to for an 
explanation of what takes place. 

The theoretical output of the Schoolmen has neces- 
sarily an accentuated pragmatic complexion, since the 
whole cultural scheme under which they lived and worked 
was of a strenuously pragmatic character. The current 
concepts of things were then drawn in terms of expe- 
diency, personal force, exploit, prescriptive authority, and 
the like, and this range of concepts was by force of habit 
employed in the correlation of facts for purposes of 
knowledge even where no immediate practical use of the 
knowledge so gained was had in view. At the same time 
a very large proportion of the scholastic researches and 
speculations aimed directly at rules of expedient conduct, 
whether it took the form of a philosophy of life under 
temporal law and custom, or of a scheme of salvation un- 
der the decrees of an autocratic Providence. A naive 
apprehension of the dictum that all knowledge is prag- 
matic would find more satisfactory corroboration in the 
intellectual output of scholasticism than in any system 
of knowledge of an older or a later date. 

With the advent of modern times a change comes over 
the nature of the inquiries and formulations worked out 
under the guidance of the idle curiosity — which from 
this epoch is often spoken of as the scientific spirit. The 
change in question is closely correlated with an analogous 
‘change in institutions and habits of life, particularly with 
the changes which the modern era brings in industry and 
in the economic organisation of society. It is doubtful 
whether the characteristic intellectual interests and teach- 
ings of the new era can properly be spoken of as less 
“ pragmatic,” as that term is sometimes understood, than 


The Place of Science 13 


those of the scholastic times; but they are of another 
kind, being conditioned by a different cultural and in- 
dustrial situation.® In the life of the new era conceptions 
of authentic rank and differential dignity have grown 
weaker in practical affairs, and notions of preferential 
reality and authentic tradition similarly count for less in 
the_new science. The forces at work in the external 
world are conceived in a less animistic manner, although 
anthropomorphism still prevails, at least to the degree 
required in order to give a dramatic interpretation of the 
sequence of phenomena. 

The changes in the cultural situation which seem to 
have had the most serious consequences for the methods 
and animus of scientific inquiry are those changes that 
took place in the field of industry. Industry in early 
modern times is a fact of relatively greater preponder- 
ance, more of a tone-giving factor, than it was under the 
régime of feudal status. It is the characteristic trait 
of the modern culture, very much as exploit and fealty 
were the characteristic cultural traits of the earlier time. 
This early-modern industry is, in an obvious and con- 
vincing degree, a matter of workmanship. The same has 
not been true in the same degree either before or since. 
The workman, more or less skilled and with more or less 
specialised efficiency, was the central figure in the cul- 
tural situation of the time; and so the concepts of the 
scientists came to be drawn in the image of the work- 
man. The dramatisations of the sequence of external 


®As currently employed, the term “pragmatic” is made to 
cover both conduct looking to the agent’s preferential advantage, 
expedient conduct, and workmanship directed to the production 
of things that may or may not be of advantage to the agent. If 
the term be taken in the latter meaning, the culture of modern 
times is no less “pragmatic” than that of the Middle Ages. It 
is here intended to be used in the former sense. 


14 The Place of Science 


phenomena worked out under the impulse of the idle 
curiosity were then conceived in terms of workmanship. 
Workmanship gradually supplanted differential dignity 
as the authoritative canon of scientific truth, even on the 
higher levels of speculation and research. This, of 
course, amounts to saying in other words that the law of 
cause and effect was given the first place, as contrasted 
with dialectical consistency and authentic tradition. But 
this early-modern law of cause and effect —the law of 
efficient causes — is of an anthropomorphic kind. “ Like 
causes produce like effects,” in much the same sense as 
the skilled workman’s product is like the workman; 
“nothing is found in the effect that was not contained in 
the cause,” in much the same manner. 

These dicta are, of course, older than modern science, 
but it is only in the early days of modern science that 
they come to rule the field with an unquestioned sway and 
to push the higher grounds of dialectical validity to one 
side. They invade even the highest and most recondite 
fields of speculation, so that at the approach to the transi- 
tion from the early-modern to the late-modern period, in 
the eighteenth century, they determine the outcome even 
in the counsels of the theologians. The deity, from hay- 
ing been in medizval times primarily a suzerain concerned 
with the maintenance of his own prestige, becomes pri- 
marily a creator engaged in the workmanlike occupation 
of making things useful for man. His relation to man 
and the natural universe is no longer primarily that of 
a progenitor, as it is in the lower barbarian culture, but 
rather that of a talented mechanic. The “ natural laws ” 
which the scientists of that era make so much of are no 
longer decrees of a preternatural legislative authority, 
but rather details of the workshop specifications handed 
down by the master-craftsman for the guidance of handi- 


The Place of Science 15 


craftsmen working out his designs. In the eighteenth- 
century science these natural laws are laws specifying the 
sequence of cause and effect, and will bear characterisa- 
tion as a dramatic interpretation of the activity of the 
causes at work, and these causes are conceived in a quasi- 
personal manner. In later modern times the formula- 
tions of causal sequence grow more impersonal and more 
objective, more matter-of-fact; but the imputation of 
activity to the observed objects never ceases, and even 
in the latest and maturest formulations of scientific re- 
search the dramatic tone is not wholly lost. The causes 
at work are conceived in a highly impersonal way, but 
hitherto no science (except ostensibly mathematics) has 
been content to do its theoretical work in terms of inert 
magnitude alone. Activity continues to be imputed to 
the phenomena with which science deals; and activity is, 
of course, not a fact of observation, but is imputed to 
the phenomena by the observer.’° This is, also of course, 
denied by those who insist on a purely mathematical 
formulation of scientific theories, but the denial is main- 
tained only at the cost of consistency. Those eminent 
authorities who speak for a colorless mathematical formu- 
lation invariably and necessarily fall back on the (essen- 
tially metaphysical) preconception of causation as soon 
as they go into the actual work of scientific inquiry.** 
Since the machine technology has made great advances, 
during the nineteenth century, and has become a cultural 
force of wide-reaching consequence, the formulations of 


10 Epistemologically speaking, activity is imputed to phenomena 
for the purpose of organising them into a dramatically consistent 
system. 

11Cf,, e.g, Karl Pearson, Grammar of Science, and compare 
his ideal of inert magnitudes as set forth in his exposition with 
his actual work as shown in chaps. 9, Io, and 12, and more par- 
ticularly in his discussions of “ Mother Right” and related topics 
in The Chances of Death, 


16 The Place of Science 


science have made another move in the direction of im- 
personal matter-of-fact. The machine process has dis- 
placed the workman as the archetype in whose image 
causation is conceived by the scientific investigators. The 
dramatic interpretation of natural phenomena has thereby 
become less anthropomorphic; it no longer constructs the 
life-history of a cause working to produce a ‘given effect 
—after the manner of a skilled workman producing a 
piece of wrought goods — but it constructs the life-his- 
tory of a process in which the distinction between cause 
and effect need scarcely be observed in an itemised and 
specific way, but in which the run of causation unfolds 
itself in an unbroken sequence of cumulative change. 
By contrast with the pragmatic formulations of worldly 
wisdom these latter-day theories of the scientists appear 
highly opaque, impersonal, and matter-of-fact; but taken 
by themselves they must be admitted still to show the 
constraint of the dramatic prepossessions that once guided 
the savage myth-makers. 

In so far as touches the aims and the animus of sci- 
entific inquiry, as seen from the point of view of the 
scientist, it is a wholly fortuitous and insubstantial co- 
incidence that much of the knowledge gained under ma- 
chine-made canons of research can be turned to prac- 
tical account. Much of this knowledge is useful, or may 
be made so, by applying it to the control of the processes 
in which natural forces are engaged. This employment 
of scientific knowledge for useful ends is technology, in 
the broad sense in which the term includes, besides the 
machine industry proper, such branches of practice as 
engineering, agriculture, medicine, sanitation, and eco- 
nomic reforms. The reason why scientific theories can 
be turned to account for these practical ends is not that 
these ends are included in the scope of scientific inquiry. 


The Place of Science 17 


These useful purposes lie outside the scientist’s eel 
It is not that he aims, or can aim, at technological im- 
provements. His inquiry is as “idle” as that of the 
Pueblo myth-maker. But the canons of validity under 
whose guidance he works are those imposed by the mod- 
ern technology, through habituation to its requirements; 
and therefore his results are available for the technolog- 
ical purpose. His canons of validity are made for him 
by the cultural situation; they are habits of thought im- 
posed on him by the scheme of life current in the com- 
munity in which he lives; and under modern conditions 
this scheme of life is largely machine-made. In the mod- 
ern culture, industry, industrial processes, and industrial 
products have progressively gained upon humanity, until 
these creations of man’s ingenuity have latterly come to 
take the dominant place in the cultural scheme; and it is 
not too much to say that they have become the chief 
force in shaping men’s daily life, and therefore the chief 
factor in shaping men’s habits of thought. Hence men 
have learned to think in the terms in which the technolog- 
ical processes act. This is particularly true of those men 
who by virtue of a peculiarly strong susceptibility in this 
direction become addicted to that habit of matter-of-fact 
inquiry that constitutes scientific research. 

Modern technology makes use of the same range of 
concepts, thinks in the same terms, and applies the same 
tests of validity as modern science. In both, the terms 
of standardisation, validity, and finality are always terms 
of impersonal sequence, not terms of human nature or 
of preternatural agencies. Hence the easy copartnership 
between the two. Science and technology play into one 
another’s hands. The processes of nature with which 
_ science deals and which technology turns to account, the 
sequence of changes in the external world, animate and 


18 The Place of Science 


inanimate, run in terms of brute causation, as do the 
theories of science. These processes take no thought of 
human expediency or inexpediency. To make use of 
them they must be' taken as they are, opaque and unsym- 
pathetic. Technology, therefore, has come to proceed 
on an interpretation of these phenomena in mechanical 
terms, not in terms of imputed personality nor even of 
workmanship. Modern science, deriving its concepts 
from the same source, carries on its inquiries and states 
its conclusions in terms of the same objective character 
as those employed by the mechanical engineer. ,/ 

So it has come about, through the progressive change 
of the ruling habits of thought in the community, that 
the theories of science have progressively diverged from 
the formulations of pragmatism, ever since the modern 
era set in. From an organisation of knowledge on the 
basis of imputed personal or animistic propensity the 
theory has changed its base to an imputation of brute 
activity only, and this latter is conceived in an increas- 
ingly matter-of-fact manner; until, latterly, the pragmatic 
range of knowledge and the scientific are more widely out 
of touch than ever, differing not only in aim, but in matter 
as well. In both domains knowledge runs in terms of 
activity, but it is on the one hand knowledge of what had 
best be done, and on the other hand knowledge of what 
takes place; on the one hand knowledge of ways and 
means, on the other hand knowledge without any ulterior 
purpose. The latter range of knowledge may serve the 
ends of the former, but the converse does not hold true. 

These two divergent ranges of inquiry are to be found 
together in all phases of human culture. What distin- 
guishes the present phase is that the discrepancy between 
the two is now wider than ever before. The present is 
nowise distinguished above other cultural eras by any 


The Place of Science 19 


exceptional urgency or acumen in the search for prag- 
matic expedients. Neither is it safe to assert that the 
present excels all other civilisations in the volume or 

the workmanship of that body of knowledge that is to 

be credited to the idle curiosity. What distinguishes the 

present in these premises is (1) that the primacy in the 

cultural scheme has passed from pragmatism to a dis-' 
interested inquiry whose motive is idle curiosity, and (2) 

that in the domain of the latter the making of myths and 
legends in terms of imputed personality, as well as the 

construction of dialectical systems in terms of differential 
reality, has yielded the first place to the making of theories 
in terms of matter-of-fact sequence.'” 

Pragmatism creates nothing but maxims of expedient 
conduct. Science creates nothing but theories.1* It 
knows nothing of policy or utility, of better or worse. 
None of all that is comprised in what is to-day accounted 
scientific knowledge. Wisdom and proficiency of the 
pragmatic sort does not contribute to the advance of a 
knowledge of fact. It has only an incidental bearing on 
scientific research, and its bearing is chiefly that of inhi- 
bition and misdirection. Wherever canons of expediency 
are intruded into or are attempted to be incorporated in 
the inquiry, the consequence is an unhappy one for sci- 
ence, however happy it may be for some other purpose 
extraneous to science. The mental attitude of worldly 
wisdom is at cross-purposes with the disinterested sci- 
entific spirit, and the pursuit of it induces an intellectual 
bias that is incompatible with scientific insight. Its in- 
tellectual output is a body of shrewd rules of conduct, in 
great part designed to take advantage of human infirmity. 


12Cf. James, Psychology, Vol. II, chap. 28, pp. 633-71, esp. p: 
640 note. 
18 Cf. Ward, Principles of Psychology, pp. 439-43. 


20 The Place of Science 


Its habitual terms of standarisation and validity are terms 
of human nature, of human preference, prejudice, aspi- 
ration, endeavor, and disability, and the habit of mind 
that goes with it is such as is consonant with these terms. 
No doubt, the all-pervading pragmatic animus of the older 
and non-European civilisations has had more than any- 
thing else to do with their relatively slight and slow ad- 
vance in scientific knowledge. In the modern scheme of 
knowledge it holds true, in a similar manner and with 
analogous effect, that training in divinity, in law, and in 
the related branches of diplomacy, business tactics, mili- 
tary affairs, and political theory, is alien to the skeptical 
scientific spirit and subversive of it. 

The modern scheme of culture comprises a large body 
of worldly wisdom, as well as of science. This pragmatic 
lore stands over against science with something of a jeal- 
ous reserve. The pragmatists value themselves some- 
what on being useful as well as being efficient for good 
and evil. They feel the inherent antagonism between 
themselves and the scientists, and look with some doubt 
on the latter as being merely decorative triflers, although 
they sometimes borrow the prestige of the name of science 
—as is only good and well, since it is of the essence of 
worldly wisdom to borrow anything that can be turned 
to account. The reasoning in these fields turns about 
questions of personal advantage of one kind or another, 
and the merits of the claims canvassed in these discus- 
sions are decided on grounds of authenticity. Personal 
claims make up the subject of the inquiry, and these 
claims are construed and decided in terms of precedent 
and choice, use and wont, prescriptive authority, and the 
like. The higher reaches of generalisation in these prag- 
matic inquiries are of the nature of deductions from au- 
thentic tradition, and the training in this class of reason- 


The Place of Science 21 


ing gives discrimination in respect of authenticity and 
expediency. The resulting habit of mind is a bias for 
substituting dialectical distinctions and decisions de jure 
in the place of explanations de facto. The so-called “ sci- 
ences ” associated with these pragmatic disciplines, such 
as jurisprudence, political science, and the like, are a 
taxonomy of credenda. Of this character was the greater 
part of the “science” cultivated by the Schoolmen, and 
large remnants of the same kind of authentic convictions 
are, of course, still found among the tenets of the sci- 
entists, particularly in the social sciences, and no small 
solicitude is still given to their cultivation. Substan- 
tially the same value as that of the temporal pragmatic 
inquiries belongs also, of course, to the “science” of 
divinity. Here the questions to which an answer is 
sought, as well as the aim and method of inquiry, are of 
the same pragmatic character, although the argument runs 
on a higher plane of personality, and seeks a solution in 
terms of a remoter and more metaphysical expediency. 


In the light of what has been said above, the questions 
recur: How far is the scientific quest of matter-of-fact 
knowledge consonant with the inherited intellectual apti- 
tudes and propensities of the normal man? and, What 
foothold has science in the modern culture? The former 
is a question of the temperamental heritage of civilised 
mankind, and therefore it is in large part a question of 
the circumstances which have in the past selectively 
shaped the human nature of civilised mankind. Under 
the barbarian culture, as well as on the lower levels of 
what is currently called civilised life, the dominant note 
has been that of competitive expediency for the individual 
or the group, great or small, in an avowed struggle for 
the means of life. Such is still the ideal of the politician 


22 The Place of Science 


and business man, as well as of other classes whose habits 
of life lead them to cling to the inherited barbarian tra- 
ditions. The upper-barbarian and lower-civilised culture, 
as has already been indicated, is pragmatic, with a thor- 
oughness that nearly bars out any non-pragmatic ideal of 
life or of knowledge. Where this tradition is strong 
there is but a precarious chance for any consistent effort 


to formulate knowledge in other terms than those drawn 


from the prevalent relations of personal mastery and sub- 
servience and the ideals of personal gain. 

During the Dark and Middle Ages, for instance, it is 
true in the main that any movement of thought not con- 
trolled by considerations of expediency and conventions 
of status are to be found only in the obscure depths of 
vulgar life, among those neglected elements of the popu- 
lation that lived below the reach of the active class strug- 
gle. What there is surviving of this vulgar, non-prag- 
matic intellectual output takes the form of legends and 
folk-tales, often embroidered on the authentic documents 
of the Faith.. These are less alien to the latest and high- 
est culture of Christendom than are the dogmatic, dia- 
lectical, and chivalric productions that occupied the atten- 
tion of the upper classes in medizval times. It may seem 
a curious paradox that the latest and most perfect flower 
of the western civilisation is more nearly akin to the 
spiritual life of the serfs and villeins than it is to that of 
the grange or the abbey. The courtly life and the chiv- 
alric habits of thought of that past phase of culture have 
left as nearly no trace in the cultural scheme of later mod- 
ern times as could well be. Even the romancers who 
ostensibly rehearse the phenomena of chivalry, unavoid- 
ably make their knights and ladies speak the language 
and the sentiments of the slums of that time, tempered 
with certain schematised modern reflections and specu- 


The Place of Science 23 


lations. The gallantries, the genteel inanities and devout 
imbecilities of medieval high-life would be insufferable 
even to the meanest and most romantic modern intelli- 
gence. So that in a later, less barbarian age the pre- 
carious remnants of folklore that have come down through 
that vulgar channel— half savage and more than half 
pagan — are treasured as containing the largest spiritual 
gains which the barbarian ages of Europe have to offer. 
The sway of barbarian pragmatism has, everywhere in 
the western world, been relatively brief and relatively 
light ; the only exceptions would be found in certain parts 
of the Mediterranean seaboard. But wherever the bar- 
barian culture has been sufficiently long-lived and unmiti- 
gated to work out a thoroughly selective effect in the 
human material subjected to it, there the pragmatic 
animus may be expected to have become supreme and 
to inhibit all movement in the direction of scientific in- 
quiry and eliminate all effective aptitude for other than 
worldly wisdom. What the selective consequences of 
such a protracted régime of pragmatism would be for the 
temper of the race may be seen in the human flotsam left 
by the great civilisations of antiquity, such as Egypt, In- 
dia, and Persia. Science is not at home among these 
leavings of barbarism. In these instances of its long and 
unmitigated dominion the barbarian culture has selec- 
tively worked out a temperamental bias and a scheme of 
life from which objective, matter-of-fact knowledge is 
virtually excluded in favor of pragmatism, secular and 
religious. But for the greater part of the race, at least 
for the greater part of civilised mankind, the régime of 
the mature barbarian culture has been of relatively short 
duration, and has had a correspondingly superficial and 
transient selective effect. It has not had force and time 
to eliminate certain elements of human nature handed 


24 The Place of Science 


down from an earlier phase of life, which are not in full 
consonance with the barbarian animus.or with the de- 
mands of the pragmatic ‘scheme of thought. The bar- 
barian-pragmatic habit of mind, therefore, is not properly 
speaking a temperamental trait of the civilised peoples, 
except possibly within certain class limits (as, e.g., the 
German nobility). It is rather a tradition, and it does 
not constitute so tenacious a bias as to make head against 
the strongly materialistic drift of modern conditions and 
set aside that increasingly urgent resort to matter-of-fact 
conceptions that makes for the primacy of science. Civ- 
ilised mankind does not in any great measure take back 
atavistically to the upper-barbarian habit of mind. Bar- 
barism covers too small a segment of the life-history of 
the race to have given an enduring temperamental result. 
The unmitigated discipline of the higher barbarism in 
Europe fell on a relatively small proportion of the popu- 
lation, and in the course of time this select element of the 
population was crossed and blended with the blood of the 
lower elements whose life always continued to run in the 
ruts of savagery rather than in those of the high-strung, 
finished barbarian culture that gave rise to the chivalric 
scheme of life. 

Of the several phases of human culture the most pro- 
tracted, and the one which has counted for most in shap- 
ing the abiding traits of the race, is unquestionably that 
of savagery. With savagery, for the purpose in hand, 
is to be classed that lower, relatively peaceable barbarism 
that is not characterised by wide and sharp class dis- 
crepancies or by an unremitting endeavor of one indi- 
vidual or group to get the better of another. Even under 
the full-grown barbarian culture —as, for instance, dur- 
ing the Middle Ages — the habits of life and the spiritual 
interests of the great body of the population continue in 


The Place of Science 25 


large measure to bear the character of savagery. The 
savage phase of culture accounts for by far the greater 
portion of the life-history of mankind, particularly if the 
lower barbarism and the vulgar life of later barbarism 
be counted in with savagery, as in a measure they prop- 
erly should. This is particularly true of those racial 
elements that have entered into the composition of the 
leading peoples of Christendom. 

The savage culture is characterised by the relative ab- 
- sence of pragmatism from the higher generalisations of 
its knowledge and beliefs. As has been noted above, its 
theoretical creations are chiefly of the nature of my- 
thology shading off into folklore. This genial spinning 
of apocryphal yarns-is; at its best, an amiably inefficient 
formulation of experiences and observations in terms of 
something like a life-history of the phenomena observed. 
It has, on the one hand, little value, and little purpose, 
in the way of pragmatic expediency, and so it is not closely 
akin to the pragmatic-barbarian scheme of life; while, 
on the other hand, it is also ineffectual as a systematic 
knowledge of matter-of-fact. It is a quest of knowledge, 
perhaps of systematic knowledge, and it is carried on 
under the incentive of the idle curiosity. In this respect 
it falls in the same class with the civilised man’s science; 
but it seeks knowledge not in terms of opaque matter-of- 
fact, but in terms of some sort of spiritual life imputed 
to the facts. It is romantic and Hegelian rather than 
realistic and Darwinian. The logical necessities of its 
scheme of thought are necessities of spiritual consistency 
rather than of quantitative equivalence. It is like science 
in that it has no ulteriar motive beyond the idle craving 
for a systematic correlation of data; but it is unlike sci- 
ence in that its standardisation and correlation of data 
run in terms of the free play of imputed personal initia- 


26 The Place of Science 


tive rather than in terms of the constraint of objective 
cause and effect. : 

By force of the protracted selective discipline of this 
past phase of culture, the human nature of civilised man- 
kind is still substantially the human nature of savage man. 
The ancient equipment of congenital aptitudes and pro- 
pensities stands over substantially unchanged, though 
overlaid with barbarian traditions and conventionalities 
and readjusted by habituation to the exigencies of civ- 
ilised life. In a measure, therefore, but by no means 
altogether, scientific inquiry is native to civilised man 
with his savage heritage, since scientific inquiry proceeds 
on the same general motive of idle curiosity as guided the 
savage myth-makers, though it makes use of concepts and 
standards in great measure alien to the myth-makers’ 
habit of mind. The ancient human predilection for dis- 
covering a dramatic play of passion and intrigue in the 
phenomena of nature still asserts itself. In the most 
advanced communities, and even among the adepts of 
modern science, there comes up persistently the revulsion 
of the native savage against the inhumanly dispassionate 
sweep of the scientific quest, as well as against the inhu- 
manly ruthless fabric of technological processes that have 
come out of this search for matter-of-fact knowledge. 
Very often the savage need of a spiritual interpretation 
(dramatisation) of phenomena breaks through the crust 
of acquired materialistic habits of thought, to find such 
refuge as may be had in articles of faith seized on and 
held by sheer force of instinctive conviction. Science 
and its creations are more or less uncanny, more or less 
alien, to that fashion of craving for knowledge that by 
ancient inheritance animates mankind. Furtively or by 
an overt breach of consistency, men still seek comfort 
in marvelous articles of savage-born lore, which contra- 


The Place of Science 27 


dict the truths of that modern science whose dominion 
they dare not question, but whose findings at the same 
time go beyond the breaking point of their jungle-fed 
spiritual sensibilities. 

The ancient ruts of savage thought and conviction are 
smooth and easy; but however sweet and indispensable 
the archaic ways of thinking may be to the civilised man’s 
peace of mind, yet such is the binding force of matter-of- 
fact analysis and inference under modern conditions that 
_ the findings of science are not questioned on the whole. 
The name of science is after all a word to conjure with. 
So much so that the name and the mannerisms, at least, 
if nothing more of science, have invaded all fields of 
learning and have even overrun territory that belongs 
to the enemy. So there are “sciences ” of theology, law, 
and medicine, as has already been noted above. And 
there are such things as Christian Science, and “ scientific ” 
astrology, palmistry, and the like. But within the field 
of learning proper there is a similar predilection for an 
air of scientific acumen and precision where science does 
not belong. So that even that large range of knowledge 
that has to do with general information rather than with 
theory — what is loosely termed scholarship — tends 
strongly to take on the name and forms of theoretical 
statement. However decided the contrast between these 
branches of knowledge on the one hand, and science prop- 
erly so called on the other hand, yet even the classical 
learning, and the humanities generally, fall in with this 
predilection more and more with each succeeding genera- 
tion of students. The students of literature, for in- 
stance, are more and more prone to substitute critical 
analysis and linguistic speculation, as the end of their en- 
deavors, in the place of that discipline of taste and that 
cultivated sense of literary form and literary feeling that 


28 The Place of Science 


must always remain the chief end of literary training, as 
distinct from philology and the social sciences. There 
is, of course, no intention to question the legitimacy of a 
science of philology or of the analytical study of litera- 
ture as a fact in cultural history, but these things do not 
constitute training in literary taste, nor can they take 
the place of it. The effect of this straining after scien- 


tific formulations in a field alien to the scientific spirit. 


is as curious as it is wasteful. Scientifically speaking, 


these quasi-scientific inquiries necessarily begin nowhere | 


and end in the same place; while in point of cultural gain 
they commonly come to nothing better than spiritual abne- 
gation. But these blindfold endeavors to conform to 
the canons of science serve to show how wide and un- 
eae the sway of science is in the modern community. 
L Scholarship — that is to say an intimate and systematic 
familiarity with past cultural achievements — still holds 
its place in the scheme of learning, in spite of the unad- 
vised efforts of the short-sighted to blend it with the work 
of science, for it affords play for the ancient genial pro- 
pensities that ruled men’s quest of knowledge before the 
coming of science or of the outspoken pragmatic bar- 
barism. Its place may not be so large in proportion to 
the entire field of learning as it was before the scientific 
era got fully under way. But there is no intrinsic an- 
tagonism between science and scholarship, as there is 
between pragmatic training and scientific inquiry. Mod- 
ern scholarship shares with modern science the quality 
of not being pragmatic in its aim. Like science it has no 
ulterior end. It may be difficult here and there to draw 
the line between science and scholarship, and it may even 
more be unxecessary to draw such a line; yet while the 
two ranges of discipline belong together in many ways, 
and while there are many points of contact and sympathy 


The Place of Science 29 


between the two; while the two together make up the 
modern scheme of learning; yet there is no need of con- 
founding the one with the other, nor can the one do the 
work of the other. The scheme of learning has changed 
in such manner as to give science the more commanding 
place, but the scholar’s domain has not thereby been in- 
vaded, nor has it suffered contraction at the hands of 
science, whatever may be said of the weak-kneed abne- 
gation of some whose place, if they have one, is in the 
_ field of scholarship rather than of science. 


All that has been said above has of course nothing to 
say as to the intrinsic merits of this quest of matter-of- 
fact knowledge. In point of fact, science gives its tone 
to modern culture. One may approve or one may depre- 
cate the fact that this opaque, materialistic interpreta- 
tion of things pervades modern thinking. That is a ques- 
tion of taste, about which there is no disputing. The 
prevalence of this matter-of-fact inquiry is a feature of 
modern culture, and the attitude which critics take to- 
ward this phenomenon is chiefly significant as indicating 
how far their own habit of mind coincides with the en- 
lightened common-sense of civilised mankind. It shows 
in what degree they are abreast of the advance of culture. 
Those in whom the savage predilection or the barbarian 
tradition is stronger than their habituation to civilised life 
will find that this dominant factor of modern life is per- 
verse, if not calamitous; those whose habits of thought 
have been fully shaped by the machine process and sci- 
entific inquiry are likely to find it good. The modern 
western culture, with its core of matter-of-fact knowl- 
edge, may be better or worse than some other cultural 
scheme, such as the classic Greek, the medieval Chris- 
tian, the Hindu, or the Pueblo Indian. Seen in certain 


30 The Place of Science 


lights, tested by certain standards, it is doubtless better; 
by other standards, worse. But the fact remains that 
the current cultural scheme, in its maturest growth, is of 
that complexion; its characteristic force lies in this mat- 
ter-of-fact insight; its highest discipline and its maturest 
aspirations are these. 

In point of fact, the sober common-sense of civilised 
mankind accepts no other end of endeavor as self-suffi- 
cient and ultimate. That such is the case seems to be 
due chiefly to the ubiquitous presence of the machine 
technology and its creations in the life of modern com- 
munities. And so long as the machine process continues 
to hold its dominant place as a disciplinary factor in mod- 
ern culture, so long must the spiritual and intellectual life 
of this cultural era maintain the character which the 
machine process gives it. ; 

But while the scientist’s spirit and his achievements stir 
an unqualified admiration in modern men, and while his 
discoveries carry conviction as nothing else does, it does 
not follow that the manner of man which this quest of 
knowledge produces or requires comes near answering to 
the current ideal of manhood, or that his conclusions are 
felt to be as good and beautiful as they are true. The 
ideal man, and the ideal of human life, even in the appre- 
hension of those who most rejoice in the advances of 
science, is neither the finikin skeptic in the laboratory 
nor the animated slide-rule. The quest of science is 
relatively new. It is a cultural factor not comprised, in 
anything like its modern force, among those circum- 
stances whose selective action in the far past has given 
to the race the human nature which it now has. The 
race reached the human plane with little of this search- 
ing knowledge of facts; and throughout the greater part 
of its life-history on the human plane it has been accus- 


The Place of Science 31 


tomed to make its higher generalisations and to formu- 
late its larger principles of life in other terms than those 
of passionless matter-of-fact. This manner of knowl- 
edge has occupied an increasing share of men’s atten- 
tion in the past, since it bears in a decisive way upon the 
minor affairs of workday life; but it has never until now 
been put in the first place, as the dominant note of human 
culture. The normal man, such as his inheritance has 
made him, has therefore good cause to be restive under 
its dominion. 


THE EVOLUTION: OF THE SCIENTIFIC 
POINT OF VIEW + 


A piscussIon of the scientific point of view which avow- 
edly proceeds from this point of view itself has necessarily 
the appearance of an argument in a circle; and such in 
great part is the character of what here follows. It is 
in large part an attempt to explain the scientific point of 
view in terms of itself, but not altogether. This inquiry 
does not presume to deal with the origin or the legitima- 
tion of the postulates of science, but only with the growth 
of the habitual use of these postulates, and the manner 
of using them. The point of inquiry is the changes which 
have taken place in the secondary postulates involved in 
the scientific point of view —in great part a question of 
the progressive redistribution of emphasis among the pre- 
conceptions under whose guidance successive generations 
of scientists have gone to their work. 


The sciences which are in any peculiar sense modern 
take as an (unavowed) postulate the fact of consecutive 
change. Their inquiry always centers upon some manner 
of process. This notion of process about which the re- 
searches of modern science cluster, is a notion of a se- 
quence, or complex, of consecutive change in which the 
nexus of the sequence, that by virtue of which the change 
inquired into is consecutive, is the relation of cause and 
effect.\ The consecution, moreover, runs in terms of 
persistence of quantity or of force. In so far as the sci- 


1 Read before the Kosmos Club, at the University of California, 
May 4, 1908. Reprinted by permission from the University of 
California Chronicle, Vol. X, No. 4. 

32 


The Point of View 33 


ence is of a modern complexion, in so far as it is not of 
the nature of taxonomy simply, the inquiry converges 
upon a matter of process; and it comes to rest, provi- 
sionally, when it has disposed of its facts in terms of 
process. But modern scientific inquiry in any case comes 
to rest only provisionally ; because its prime postulate is 
that of consecutive change, and consecutive change can, 
of course, not come to rest except provisionally. By its 
own nature the inquiry cannot reach a final term in any 
_ direction. So it is something of a homiletical common- 
place to say that the outcome of any serious research can 
only be to make two questions grow where one question 
grew before. Such is necessarily the case because the 
postulate of the scientist is that things change consecu- 
tively. It is an unproven and unprovable postulate — 
that is to say, it is a metaphysical preconception — but it 
gives the outcome that every goal of research is neces- 
sarily a point of departure; every term is transitional.” 


2Tt is by no means unusual for modern scientists to deny the 
truth of this characterization, so far as regards this alleged re- 
course to the concept of causation. They deny that such a con- 
cept — of efficiency, activity, and the like — enters, or can legit- 
imately enter, into their work, whether as an instrument of 
research or as a means or guide to theoretical formulation. They 
even deny the substantial continuity of the sequence of changes 
that excite their scientific attention. This attitude seems par- 
ticularly to commend itself to those who by preference attend 
to the mathematical formulations of theory and who are chiefly 
occupied with proving up and working out details of the system 
of theory which have previously been left unsettled or uncovered. 
The concept of causation is recognized to be a metaphysical 
postulate, a matter of imputation, not of observation; whereas 
it is claimed that scientific inquiry neither does nor can legiti- 
mately, nor, indeed, currently, make use of a postulate more meta- 
physical than the concept of an idle concomitance of variation, 
such as is adequately expressed in terms of mathematical 
function. 

The contention seems sound, to the extent that the materials 
—essentially statistical materials — with which scientific inquiry 


2 


34 The Point of View 


A hundred years ago, or even fifty years ago, sci- 
entific men were not in the habit of looking at the matter 


is occupied are of this non-committal character, and that the 
mathematical formulations of theory include no further element 
than that of idle variation. Such is necessarily the case because 
causation is a fact of imputation, not of observation, and so can- 
not be included among the data; and because nothing further 
than non-committal variation can be expressed in mathematical 
terms. A bare notation of quantity can convey nothing further. 

If it were the intention to claim only that the conclusions of 
the scientists are, or should be, as a matter of conservative cau- 
tion, overtly stated in terms of function alone, then the con- 
tention might well be allowed. Causal sequence, efficiency or 
continuity is, of course, a matter of metaphysical imputation. 
It is not a fact of observation, and cannot be asserted of the 
facts of observation except as a trait imputed to them. It is so 
imputed, by scientists and others, as a matter of logical neces- 
sity, as a basis of a systematic knowledge of the facts of obser- 
vation. 

Beyond this, in their exercise of scientific initiative, as well as 
in the norms which guide the systematisation of scientific results, 
the contention will not be made good —at least not for the cur- 
rent phase of scientific knowledge. The claim, indeed, carries 
its own refutation. In making such a claim, both in rejecting 
the imputation of metaphysical postulates and in defending their 
position against their critics, the arguments put forward by the 
scientists run in causal terms. For the polemical purposes, 
where their antagonists are to be scientifically confuted, the 
defenders of the non-committal postulate of concomitance find 
that postulate inadequate. They are not content, in this pre- 
carious conjuncture, simply to attest a relation of idle quanti- 
tative concomitance (mathematical function) between the al- 
legations of their critics, on the one hand, and their own con- 
troversial exposition of these matters on the other hand. They 
argue that they do not “make use of” such a postulate as “ effi- 
ciency,” whereas they claim to “make use of” the concept of 
function. But ‘make use of ” is not a notion of functional vari- 
ation but of causal efficiency in a somewhat gross and highly 
anthropomorphic form. The relation between their own thinking 
and the “ principles ” which they “apply” or the experiments and 
calculations which they “institute” in their “search” for facts, 
is not held to be of this non-committal kind. It will not be 
claimed that the shrewd insight and the bold initiative of a man 
eminent in the empirical sciences bear no more efficient or con- 


The Point of View 35 


in this way. At least it did not then seem a matter of 
course, lying in the nature of things, that scientific inquiry 


sequential a relation than that of mathematical function to the 
ingenious experiments by which he tests his hypotheses and ex- 
tends the secure bounds of human knowledge. Least of all is the 
masterly experimentalist himself in a position to deny that his 
intelligence counts for something more efficient than idle concom- 
itance in such a case. The connection between his premises, 
hypotheses, and experiments, on the one hand, and his theo- 
retical results, on the other hand, is not felt to be of the nature 
of mathematical function. Consistently adhered to, the prin- 
ciple of “function” or concomitant variation precludes recourse 
to experiment, hypotheses or inquiry — indeed, it precludes “ re- 
course” to anything whatever. Its notation does not comprise 
anything so anthropomorphic. 

The case is illustrated by the latter-day history of theoretical 
physics. Of the sciences which affect a non-committal attitude 
in respect of the concept of efficiency and which claim to get 
along with the notion of mathematical function alone, physics 
is the most outspoken and the one in which the claim has the 
best prima facie validity. At the same time, latter-day physicists, 
for a hundred years or more, have been much occupied with 
explaining how phenomena which to all appearance involve action 
at a distance do not involve action at a distance at all. The 
greater theoretical achievements of physics during the past cen- 
tury lie within the sweep of this (metaphysical) principle that 
action at a distance does not take place, that apparent action 
at a distance must be explained by effective contact, through a 
continuum, or by a material transference. But this principle is 
nothing better than an unreasoning repugnance on the part of the 
physicists to admitting action at a distance. The requirement of 
a continuum involves a gross form of the concept of efficient 
causation. The “functional” concept, concomitant variation, re- 
quires no contact and no continuum. Concomitance at a dis- 
tance is quite as simple and convincing a notion as concomitance 
within contact or by the intervention of a continuum, if not more 
so. What stands in the way of its acceptance is the irrepres- 
sible anthropomorphism of the physicists. And yet the great 
achievements of physics are due to the initiative of men animated 
with this anthropomorphic repugnance to the notion of con- 
comitant variation at a distance. All the generalisations on un- 
dulatory motion and translation belong here. The latter-day 
researches in light, electrical transmission, the theory of ions, 
together with what is known of the obscure and late-found 


36 The Point of View 


could not reach a final term in any direction. To-day it 
is a matter of course, and will be so avowed without argu- 
ment. Stated in the broadest terms, this is the substan- 
tial outcome of that nineteenth-century movement in sci- 
ence with which the name of Darwin is associated as a 
catch-word. 

This use of Darwin’s name does not imply that this 
epoch of science is mainly Darwin’s work. What merit 
may belong to Darwin, specifically, in these premises, is a 
question which need not detain the argument. He may, 
by way of creative initiative, have had more or less to do 
with shaping the course of things scientific. Or, if you 
choose, his voice may even be taken as only one of the 
noises which the wheels of civilisation make when they 
go round. But by scientifically colloquial usage we have 
come to speak of pre-Darwinian and post-Darwinian sci- 
ence, and to appreciate that there is a significant differ- 
ence in the point of view between the scientific era which 
preceded and that which followed the epoch to which his 
name belongs. 

Before that epoch the animus of a science was, on the 
whole, the animus of taxonomy; the consistent end of 
scientific inquiry was definition and classification,— as 
it still continues to be in such fields of science as have 
not been affected by the modern notion of consecutive 
change. The scientists of that era looked to a final term, 
a consummation of the changes which provoked their in- 
quiry, as well as to a first beginning of the matters with 
which their researches were concerned. The questions 
of science were directed to the problem, essentially classi- 


radiations and emanations, are to be credited to the same meta- 
physical preconception, which is never absent in any “ scientific ” 
inquiry in the field of physical science. It is only the “occult” 
and “Christian” “Sciences” that can dispense with this meta- 
physical postulate and take recourse to “absent treatment.” — 


The Point of View 37 


ficatory, of how things had been in the presumed pri- 
mordial stable equilibrium out of which they, putatively, 
-had come, and how they should be in the definitive state 
of settlement into which things were to fall as the out- 
come of the play of forces which intervened between 
this primordial and the definitive stable equilibrium. To 
the pre-Darwinian taxonomists the center of interest and 
attention, to which all scientific inquiry must legitimately 
converge, was the body of natural laws governing phe- 
_ nomena under the rule of causation. These natural laws 
were of the nature of rules of the game‘of causation. 
They formulated the immutable relations in which things 
“naturally ” stood to one another before causal disturb- 
ance took place between them, the orderly unfolding of 
the complement of causes involved in the transition over 
this interval of transient activity, and the settled relations 
that would supervene when the disturbance had passed 
and the transition from cause to effect had been consum- 
mated,— the emphasis falling on the consummation. 
The characteristic feature by which post-Darwinian 
science is contrasted with what went before is a new dis- 
tribution of emphasis, whereby the process of causation, 
the interval of instability and transition between initial 
cause and definitive effect, has come to take the first place 
in the inquiry; instead of that consummation in which 
causal effect was once presumed to come to rest. This 
change of the point of view was, of course, not abrupt 
or catastrophic. But it has latterly gone so far that mod- 
ern science is becoming substantially a theory of the proc- 
ess of consecutive change, which is taken as a sequence 
of cumulative change, realized to be self-continuing or 
self-propagating and to have no final term. Questions 
of a primordial beginning and a definitive outcome have 
fallen into abeyance within the modern sciences, and 


emphasis on donsoramation 


Variations 


38 The Point of View 


such questions are in a fair way to lose all claim to con- 
sideration at the hands of the scientists... Modern science 
is ceasing to occupy itself with the natural laws — the 
codified rules of the game of causation—and is con- 
cerning itself wholly with what has taken place and what 
is taking place. 


Rightly seen from this ultra-modern point of view, 
this modern science and this point of view which it affects 
are, of course, a feature of the current cultural situation, 
—of the process of life as it runs along under our eyes. 
So also, when seen from this scientific point of view, it 
is a matter of course that any marked cultural era will 
have its own characteristic attitude and animus toward 
matters of knowledge, will bring under inquiry such 
questions of knowledge as lie within its peculiar range 
of interest, and will seek answers to these questions only 
in terms that are consonant with the habits of thought 
current at the time. That is to say, science and the sci- 
entific point of view will vary characteristically in re- 
sponse to those variations in the prevalent habits of 
thought which constitute the sequence of cultural develop- 
ment; the current science and the current scientific point 
of view, the knowledge sought and the manner of seek- 
ing it, are a product of the cultural growth. Perhaps 
it would all be better characterised as a by-product of 
the cultured growth. 


This question of a scientific point of view, of a par- 
ticular attitude and animus in matters of knowledge, is a 

» question of the formation of habits of thought; and hab- 
its of thought are an outcome of habits of life. A sci- 
entific point of view is a consensus of habits of thought 
current in the community, and the scientist is constrained 


; 


: 


; 


The Point of View 39 


to believe that this consensus is formed in response to a 
more or less consistent discipline of habituation to which 
the community is subjected, and that the consensus can 
extend only so far and maintain its force only so long 
as the discipline of habituation exercised by the circum- 
stances of life enforces it and backs it up. The scheme 
of life, withitt which lies the scheme of knowledge, is a 
consensus of habits in the individuals which make up the 
community. The individual subjected to habituation is 
_each a single individual agent, and whatever affects him 
in any one line of activity, therefore, necessarily affects 
him in some degree in all his various activities. The cul- 
tural scheme of any community is a complex of the habits 
of life and of thought prevalent among the members. of 
the community. It makes up a more or less congruous 
and balanced whole, and carries within it a more or less 
consistent habitual attitude toward matters of knowl- 
edge — more or less consistent according as the commu- 
nity’s cultural scheme is more or less congruous through- 
out the body of the population; and this in its turn is in 
the main a question of how nearly uniform or consonant 
are the circumstances of experience and tradition to 
which the several classes and members of the community 
are subject. 

So, then, the change which has come over the scientific 
point of view between pre-Darwinian and post-Darwinian 
times is to be explained, at least in great part, by the 
changing circumstances of life, and therefore of habitua- 
tion, among the people of Christendom during the life- 
history of modern science. But the growth of a scientific 
point of view begins farther back than modern Christen- 
dom, and a record of its growth would be a record of the 
growth of human culture. Modern science demands a 


genetic account of the phenomena with which it deals,. 


"SHH fy 


40 The Point of View 


and a genetic inquiry into the scientific point of view 
necessarily will have to make up its account with the 
earlier phases of cultural growth. A life-history of hu- 
man culture is a large topic, not to be attempted here even 
in the sketchiest outline. The most that can be attempted 
is a hasty review of certain scattered questions and sa- 
lient points in this life-history. 


In what manner and with what effect the idle curiosit 
of mankind first began to tame the facts thrown in its 
way, far back in the night of time, and to break them in 
under a scheme of habitual interpretation ; what may have 
been the earliest norms of systematic knowledge, such 
as would serve the curiosity of the earliest generations 
of men in a way analogous to the service rendered the 
curiosity of later generations by scientific inquiry — all 
that is, of course, a matter of long-range conjecture, more 
or less wild, which cannot be gone into here. But among 
such peoples of the lower cultures as have been con- 
sistently observed, norms of knowledge and schemes for 
its systematization are always found. These norms and 
systems of knowledge are naive and crude, perhaps, but 
there is fair ground for presuming that out of the like 
norms and systems in the remoter ages of our own ante- 
cedents have grown up the systems of knowledge culti- 
vated by the peoples of history and by their representa- 
tives now living. 

It is not unusual to say that the primitive systems of 
knowledge are constructed on animistic lines; that ani- 
mistic sequence is the rule to which the facts are broken 
in. This seems to be true, if “animism” be construed 
in a sufficiently naive and inchoate sense. But this is not 
the whole case. In their higher generalisations, in what 
Powell calls their “ sophiology,” it appears that the prim- 


——————————— 


| 


The Point of View 4I 


itive peoples are guided by animistic norms; they make up 
their cosmological schemes, and the like, in terms of 
personal or quasi-personal activity, and the whole is 
thrown into something of a dramatic form. Through the 
early cosmological lore runs a dramatic consistency which 
imputes something in the way of initiative and propensity 
to the phenomena that are to be accounted for. But this 
dramatisation of the facts, the accounting for phenomena 
in terms of spiritual or quasi-spiritual initiative, is by no 
-means the whole case of primitive men’s systematic knowl- 
edge of facts. Their theories are not all of the nature of 
dramatic legend, myth, or animistic life-history, although 
the broader and more picturesque generalisations may 
take that form. There always runs along by the side of 
these dramaturgic life-histories, and underlying them, an 
obscure system of generalisations in terms of matter-of- 
fact. The system of matter-of-fact generalisations, or 
theories, is obscurer than the dramatic generalisations only 
in the sense that it is left in the background as being less 
picturesque and of less vital interest, not in the sense of 
being less familiar, less adequately apprehended, or less 
secure. The peoples of the lower cultures “ know ”’ that 
the broad scheme of things is to be explained in terms of 
creation, perhaps of procreation, gestation, birth, growth, 
life and initiative; and these matters engross the atten- 
tion and stimulate speculation. But they know equally 
well the matter of fact that water will run down hill, 
that two stones are heavier than one of them, that an 
edge-tool will cut softer substances, that two things may 
be tied together with a string, that a pointed stick may 
be stuck in the ground, and the like. There is no range 
of knowledge that is held more securely by any people 
than such matters of fact; and these are generalisations 
from experience ; they are theoretical knowledge, and they 


42 The Point of View 


are a matter of course. They underlie the dramatical 
generalisations of the broad scheme of things, and are 
so employed in the speculations of the myth-makers and 
the learned. 

It may be that the exceptional efficiency of a given 
edge-tool, e.g., will be accounted for on animistic or 
quasi-personal grounds,— grounds of magical efficacy; 
but it is the exceptional behavior of such a tool that calls 
for explanation on the higher ground of animistic po- 
tency, not its work-day performance of common work. 
So also if an edge-tool should fail to do what is expected 
of it as a matter of course, its failure may require an 
explanation in other terms than matter-of-fact. But all 
that only serves to bring into evidence the fact that a 
scheme of generalisations in terms of matter-of-fact is 
securely held and-is made use of as a sufficient and ulti- 
mate explanation of the more familiar phenomena of ex- 
perience. These commonplace matter-of-fact generalisa- 
tions are not questioned and do not clash with the higher 
scheme of things. 

All this may seem like taking pains about trivialities. 
But the data with which any scientific inquiry has to do 
are trivialities in some other bearing than that one in 
which they are of account. 

In all succeeding phases of culture, developmentally 
subsequent to the primitive phase supposed above, there 
is found a similar or analogous division of knowledge 
between a higher range of theoretical explanations of 
phenomena, an ornate scheme of things, on the one hand, 
and such an obscure range of matter-of-fact generalisa- 
tions as is here spoken of, on the other hand. And the 
evolution of the scientific point of view is a matter of the 
shifting fortunes which have in the course of cultural 
growth overtaken the one and the other of these two 


The Point of View 43 


divergent methods of apprehending and systematising the 
facts of experience. 

The historians of human culture have, no doubt justly, 
commonly dealt with the mutations that have occurred on 
the higher levels of intellectual enterprise, in the more 
ambitious, more picturesque, and less secure of these two 
contrasted ranges of theoretical knowledge; while the 
lower range of generalisations, which has to do with 
work-day experience, has in great part been passed over 
with scant ceremony as lying outside the current of ideas, 
and as belonging rather among the things which engage 
the attention than among the modes, expedients and cre- 
ations of this attention itself. There is good reason for 
this relative neglect of the work-day matters of fact. It 
is on the higher levels of speculative generalisation that 


the impressive mutations in the development of thought 


have taken place, and that the shifting of points of view 
troversy and i iri iven rise 
to schools of thought matter-of-fact generalisations 
have met with relatively few adventures and have afforded 
little scope for intellectual initiative and profoundly pic- 
turesque speculation. On the higher levels speculation is 
freer, the creative spirit has some scope, because its ex- 
cursions are not so immediately and harshly checked by 
material facts. 

In these speculative ranges of knowledge it is possible 
to form and to maintain habits of thought which shall be 
consistent with themselves and with the habit of mind and 
run of tradition prevalent in the community at the time, 
though not thereby consistent with the material actuali- 
ties of life in the community. Yet this range of specu- 
lative generalisation, which makes up the higher learning 
of the barbarian culture, is also controlled, checked, and 


Pog 


44 The Point of View 


guided by the community’s habits of life; it, too, is an 
integral part of the scheme of life and is an outcome of 
the habituation enforced by experience. But it does not 
rest immediately on men’s dealings with the refractory 
phenomena of brute creation, nor is it guided, undisguised 
and directly, by the habitual material (industrial) occu- 
pations. The fabric of institutions intervenes between 
the material exigencies of life and the speculative scheme 
of things. 

The higher theoretical knowledge, that body of tenets 
which rises to the dignity of a philosophical or scientific 


f 


system, in the early culture, is_a complex of habits..of _ 


thought which reflect. the-habits of life embodied in the 


_ institutional structure of society; while the lower, matter- 


of-fact generalisations of work-day efficiency — the trivial 
matters of course —reflect the workmanlike habits of 
life enforced by the commonplace material exigencies un- 
der which men live. The distinction is analogous, and 
indeed, closely related, to the distinction between “ in- 
tangible”” and “tangible” assets. And the institutions 
are more flexible, they involve or admit a larger margin 
of error, or of tolerance, than the material exigencies. 
The latter are systematised into what economists have 
called “the state of the idustrial arts,” which enforce 
a somewhat rigorous standardisation of whatever knowl- 
edge falls within their scope; whereas the institutional 
scheme is a matter of law and custom, politics and reli- 
gion, taste and morals, on all of which matters men have 
opinions and convictions, and on which all men “ have a 
right to their own opinions.” The scheme of institutions 
is also not necessarily uniform throughout the several 
classes of society; and the same institution (as, e.g., 
slavery, ownership, or royalty) does not impinge with the 
same effect on all parties touched by it, The discipline of 


The Point of View 45 


any institution of servitude, e.g., is not the same for the 
master as for the serf, etc. If there is a considerable 
institutional discrepancy between an upper and a lower 
class in the community, leading to divergent lines of 
habitual interest or discipline; if by force of the cultural 
scheme the institutions of society are chiefly in the keep- 
ing of one class, whose attention is then largely engrossed 
with the maintenance of the scheme of law and order; 
while the workmanlike activities are chiefly in the hands 
of another class, in whose apprehension the maintenance 
of law and order is at the best a wearisome tribulation, 
there is likely to be a similarly considerable divergence 
or discrepancy between the speculative knowledge, culti- 
vated primarily by the upper class, and the work-day 
knowledge which is primarily in the keeping of the lower 
class. Such, in particular, will be the case if the com- 
munity is organised on a coercive plan, with well-marked 
ruling and subject classes. The important and interest- 
ing institutions in such a case, those institutions which 
fill a large angle in men’s vision and carry a great force 
of authenticity, are the institutions of coercive control, 
differential authority and subjection, personal dignity and 
consequence ; and the speculative generalisations, the in- 
stitutions of the realm of knowledge, are created in 
the image of these social institutions of status and per- 
sonal force, and fall into a scheme drawn after the plan 
of the code of honor. The work-day generalisations, 
which emerge from the state of the industrial arts, con- 
comitantly fall into a deeper obscurity, answering to the 
depth of indignity to which workmanlike efficiency sinks 
under such a cultural scheme; and they can touch and 
check the current speculative knowledge only remotely 
and incidentally. Under such a bifurcate scheme of cul- 
ture, with its concomitant two-cleft systematisation of 


46 The Point of View 


knowledge, “reality” is likely to be widely dissociated 
from fact — that is to say, the realities and verities which 
are accepted as authentic and convincing on the plane of 
speculative generalisation; while science has no show — 
that is to say, science in that modern sense of the term 
which implies a close contact, if not a coincidence, of 
reality with fact. 

Whereas, if the institutional fabric, the community’s 
scheme of life, changes in such a manner as to throw the 
work-day experience into the foreground of attention and 
to center the habitual interest of the people on the imme- 
diate material relations of men to the brute actualities, 
then the interval between the speculative realm of knowl- 
edge, on the one hand, and the work-day generalisations 
of fact, on the other hand, is likely to lessen, and the two 
ranges of knowledge are likely to converge more or less 
effectually upon a common ground. When the growth of 
culture falls into such lines, these two methods and norms 
of theoretical formulation may presently come to further 
and fortify one another, and something in the way of 
science has at least a chance to arise. 


On this view there is a degree of interdependence be- 
tween the cultural situation and the state of theoretical 
inquiry. To illustrate this interdependence, or the con- 
comitance between the cultural scheme and the character 
of theoretical speculation, it may be in place to call to 
mind certain concomitant variations of a general char- 
acter which occur in the lower cultures between the 
scheme of life and the scheme of knowledge. In this 
tentative and fragmentary presentation of evidence there 
is nothing novel to be brought forward; still less is there 
anything to be offered which carries the weight of au- 
thority. 


The Point of View 47 


On the lower levels of culture, even more decidedly than 
on the higher, the speculative systematisation of knowl- 
edge is prone to take the form of theology (mythology) 
and cosmology. This theological and cosmological lore © 
serves the savage and barbaric peoples as a theoretical 
account of the scheme of things, and its characteristic 
traits vary in response to the variations of the institu- 
tional scheme under which the community lives. In a 
prevailingly peaceable agricultural community, such, e.g., 
as the more peaceable Pueblo Indians or the more settled 
Indians of the Middle West, there is little coercive au- 
thority, few and slight class distinctions involving su- 
periority and inferiority ; property rights are few, slight 
and unstable; relationship is likely to be counted in the 
female line. In such a culture the cosmological lore is 
likely to offer explanations of the scheme of things in 
terms of generation or germination and growth. Crea- 
tion by fiat is not obtrusively or characteristically pres- 
ent. The laws of nature bear the character of an habitual 
behavior of things, rather than that of an authoritative 
code of ordinances imposed by an overruling providence. 
The theology is likely to be polytheistic in an extreme de- 
gree and in an extremely loose sense of the term, embody- 
ing relatively little of the suzerainty of God. The rela- 
tion of the deities to mankind is likely to be that of con- 
sanguinity, and as if to emphasise the peaceable, non- 
coercive character of the divine order of things, the deities 
are, in the main, very apt to be females. The matters of 
interest dealt with in the cosmological theories are chiefly 
matters of the livelihood of the people, the growth and 
care of the crops, and the promotion of industrial ways 
and means. 

With these phenomena of the peaceable culture may be 
contrasted the order of things found among a predatory 


48 The Point of View 


pastoral people — and pastoral peoples tend strongly to 
take on a predatory cultural scheme. Such a people will 
adopt male deities, in the main, and will impute to them a 
coercive, imperious, arbitrary animus and a degree of 
princely dignity. They will also tend strongly to a mono- 
theistic, patriarchal scheme of divine government; to ex- 
plain things in terms of creative fiat; and to a belief in 
the control of the natural universe by rules imposed by 
divine ordinance. The matters of prime consequence in 
this theology are matters of the servile relation of man 
to God, rather than the details of the quest of a livelihood. 
The emphasis falls on the glory of God rather than on 
the good of man. The Hebrew scriptures, particularly 
the Jahvistic elements, show such a scheme of pastoral 
cultural and predatory theoretical generalisations. 

The learning cultivated on the lower levels of culture 
might be gone into at some length if space and time per- 
mitted, but even what has been said may serve to show, 
in the most general way, what are the characteristic marks 
of this savage and barbarian lore. A similarly summary 
characterisation of a cultural situation nearer home will 
bear more directly on the immediate topic of inquiry. 
The learning of medizval Christendom shows such a con- 
comitance between the scheme of knowledge and the 
scheme of institutions, somewhat analogous to the bar- 
baric Hebrew situation. The medizval scheme of in- 
stitutions was of a coercive, authoritative character, essen- 
tially a scheme of graded mastery and graded servitude, 
in which a code of honor and a bill of differential dignity 
held the most important place. The theology of that 
time was of a like character. It was a monotheistic, or 
rather a monarchical system, and of a despotic com- 
plexion. The cosmological scheme was drawn in terms 
of fiat; and the natural philosophy was occupied, in the 


—————— 


The Point of View 49 


main and in its most solemn endeavors, with the corol- 
laries to be subsumed under the divine fiat. When the 
philosophical speculation dealt with facts it aimed to 
interpret them into systematic consistency with the glory 
of God and the divine purpose. The “ realities” of the 
scholastic lore were spiritual, quasi-personal, intangible, 
and fell into a scale of differential dignity and prepotency. 
Matter-of-fact knowledge and work-day information were 
not then fit topics of dignified inquiry. The interval, or 
discrepancy, between reality and actuality was fairly wide. 
Throughout that era, of course, work-day knowledge also 
continually increased in volume and consistency; tech- 
nological proficiency was gaining; the effective control 
of natural processes was growing larger and more secure; 
showing that matter-of-fact theories drawn from expe- 
rience were being extended and were made increasing 
use of. But all this went on in the field of industry; the 
matter-of-fact theories were accepted as substantial and 
ultimate only for the purposes of industry, only as techno- 
logical maxims, and were beneath the dignity of science. ~ 

With the transition to modern times industry comes into 
the foreground in the west-European scheme of life, and 
the institutions of European civilisation fall into a more 
intimate relation with the exigencies of industry and 
technology. The technological range of habituation pro- 
gressively counts for more in the cultural complex, and 
the discrepancy between the technological discipline and 
the discipline of law and order under the institutions then 
in force grows progressively less. The institutions of law 
and order take on a more impersonal, less coercive char- 
acter. Differential dignity and invidious discriminations 
between classes gradually lose force. 

The industry which so comes into the foreground and 
so affects the scheme of institutions is peculiar in that its 


\I 


50 The Point of View 


most obvious and characteristic trait is the workmanlike 
initiative and efficiency of the individual handicraftsman 
and the individual enterprise of the petty trader. The 
technology which embodies the theoretical substance of 
this industry is a technology of workmanship, in which 
the salient factors are personal skill, force and dili- 
gence. Such a technology, running as it does in great 
part on personal initiative, capacity, and application, 
approaches nearer to the commonplace features of the 
institutional fabric than many another technological sys- 
tem might; and its disciplinary effects in some consider- 


able measure blend with those of the institutional dis- 


cipline. The two lines of habituation, in the great era of 
handicraft and petty trade, even came to coalesce and 
fortify one another; as in the organisation of the craft 
gilds and of the industrial towns. Industrial life and 
usage came to intrude creatively into the cultural scheme 
on the one hand and into the scheme of authentic knowl- 
edge on the other hand. So the body of matter-of-fact 
knowledge, in modern times, is more and more drawn 
into the compass of theoretical inquiry; and theoretical 
inquiry takes on more and more of the animus and 
method of technological generalisation. But the matter- 
of-fact elements so drawn in are construed in terms of 
\workmanlike initiative and efficiency, as required by the 
technological preconceptions of the era of handicraft. 

In this way, it may be conceived, modern science comes 
into the field under the cloak-of technology and gradually 
encroaches on the domain of authentic theory previously 
held by other, higher, nobler, more profound, more spir- 
itual, more intangible conceptions and systems of knowl- 
edge. In this early phase of modern science its central 


, norm and universal solvent is the concept of workman- 


like initiative and efficiency. This is the new organon. 


a —- 


The Point of View 51 


Whatever is to be explained must be reduced to this 
notation and explained in these terms; otherwise the in- 
quiry does not come to rest. But when the requirements 
of this notation in terms of workmanship have been duly 
fulfilled the inquiry does come to rest. 

By the early decades of the nineteenth century, with a 
passable degree of thoroughness, other grounds of validity 
and other interpretations of phenomena, other vouchers 
for truth and reality, had been eliminated from the quest 
of authentic knowledge and from the terms in which 
theoretical results were conceived or expressed. The 
new organon had made good its pretensions. In this 
movement to establish the hegemony of workmanlike effi- 
ciency — under the style and title of the “law of causa- 
tion,” or of “efficient cause ’”’— in the realm of knowl- 
edge, the English-speaking communities took the lead after 
the earlier scientific onset of the south-European com- 
munities had gone up in the smoke of war, politics and 
religion during the great era of state-making. The 
ground of this British lead in science is apparently the 
same as that of the British lead in technology which came 
to a head in the Industrial Revolution; and these two 
associated episodes of European civilisation are appar- 
ently both traceable to the relatively peaceable run of 
life, and so of habituation, in the English-speaking com- 
munities, as contrasted with the communities of the con- 
tinent.? 

Along with the habits of thought peculiar to the tech- 


8 A broad exception may perhaps be taken at this point, to the 
effect that this sketch of the growth of the scientific animus 
overlooks the science of the Ancients. The scientific achieve- 
ments of classical antiquity are a less obscure topic to-day than 
ever before during modern times, and the more there is known 
of them the larger is the credit given them. But it is to be noted 
that, (a) the relatively large and free growth of scientific in- 


52 The Point of View 


nology of handicraft, modern science also took over and 
assimilated much of the institutional preconceptions of 
the era of handicraft and petty trade. The “natural 
laws,” with the formulation of which this early modern 


science is occupied, are the rules ing natural “ uni- 
formities*of sequence ” 5 and they punctiliously formulate 
the~due-precedure of any given cause creatively working 
out-the achievement of a given effect, very much as the 


crait rulés sagaciously specified the due routine for tur the due routine for turn- 
ing Out a staple article of me: merchantable goods. But the But these 


“atural laws” of science are also felt to have some- 
thing of that integrity and prescriptive moral force that 
belongs to the principles of the system of “ natural 
rights” which the era of handicraft has contributed to 
the institutional scheme of later times. The natural laws 
were not only held to be true to fact, but they were also 


quiry in classical antiquity is to be found in the relatively peace- 
able and industrial Greek communities (with an industrial culture 
of unknown pre-Hellenic antiquity), and (6) that the sciences 
best and chiefly cultivated were those which rest on a mathe- 
matical basis, if not mathematical sciences in the simpler sense 
of the term. Now, mathematics occupies a singular place among 
the sciences, in that it is, in its pure form, a logical discipline 
simply; its subject matter being the logic of quantity, and its 
researches being of the nature of an analysis of the intellect’s 
modes of dealing with matters of quantity. Its generalisations 
are generalisations of logical procedure, which are tested and 
verified by immediate self-observation. Such a science is in a 
peculiar degree, but only in a peculiar degree, independent of the 
detail-discipline of daily life, whether technological or institu- 
tional; and, given the propensity —the intellectual enterprise, 
r “idle curiosity’—to go into speculation in such a field, the 
results can scarcely vary in a manner to make the variants incon- 
sistent among themselves; nor need the state of institutions 
or the state of the industrial arts seriously color or distort such 
analytical work in such a field. Mathematics is peculiarly inde- 
pendent of cultural circumstances, since it deals analytically with 
mankind’s native gifts of logic, not with the ephemeral traits ac- 
quired by habituation. 


ee ee 


The Point of View 53 


felt to be right and-good. They were looked upon as 
intrinsically meritorious and beneficent, and were held 
to carry a sanction of their own. This habit of uncrit- 
ically imputing merit and equity to the “natural laws” 
of science continued in force through much of the nine- 
teenth century; very much as the habitual acceptance of 
the principles of “natural rights’? has held on by force 
of tradition long after the exigencies of experience -out 
of which these “ rights” sprang ceased to shape men’s 
habits of life.* This traditional attitude of submissive 
approval toward the “natural laws” of science has not 
yet been wholly lost, even among the scientists of the 
passing generation, many of whom have uncritically in- 
vested these “laws” with a prescriptive rectitude and 
excellence; but so far, at least, has this animus progressed 
toward disuse that it is now chiefly a matter for expatia- 
tion in the pulpit, the accredited vent for the exudation 
of effete matter from the cultural organism. 

The traditions of the handicraft technology lasted over 
as a commonplace habit of thought in science long after 
that technology had ceased to be the decisive element in 
the industrial situation; while a new technology, with its 
inculcation of new habits of thought, new preconcep- 
tions, gradually made its way among the remnants of the 
old, altering them, blending with them, and little by little 


4“Natural laws,” which are held to be not only correct 
formulations of the sequence of cause and effect in a given 
situation but also meritoriously right and equitable rules gov- 
erning the run of events, necessarily impute to the facts and 
events in question a tendency to a good and equitable, if not 
beneficent, consummation; since it is necessarily the consumma- 
tion, the effect considered as an accomplished outcome, that is to 
be adjudged good and equitable, if anything. Hence these 
“natural laws,” as traditionally conceived, are laws governing 
the accomplishment of an end — that is to say, laws as to how a 
sequence of cause and effect comes to rest in a final term. 


54 The Point of View 


superseding them. The new technological departure, 
which made its first great epoch in the so-called industrial 
revolution, in the technological ascendancy of the ma- 
chine-process, brought a new and characteristic discipline 
into the cultural situation. The beginnings of the ma- 
chine-era lie far back, no doubt; but it is only of late, 
during the past century at the most, that the machine- 
process can be said to have come into the dominant place 
in the technological scheme; and it is only later still that 
its discipline has, even in great part, remodeled the cur- 
rent preconceptions as to the substantial nature of what 
goes on in the current of phenomena whose changes ex- 
cite the scientific curiosity. It is only relatively very 
lately, whether in technological work or in scientific in- 
quiry, that men have fallen into the habit of thinking 
in terms of process rather than in terms of the workman- 
like efficiency of a given cause working to a given effect. 

These machine-made preconceptions of modern science, 
being habits of thought induced by the machine tech- 
nology in industry and in daily life, have of course first 
and most consistently affected the character of those sci- 
ences whose subject matter lies nearest to the technolog- 
ical field of the machine-process; and in these material 
sciences the shifting to the machine-made point of view 
has been relatively very consistent, giving a highly im- 
personal interpretation of phenomena in terms of con- 
secutive change, and leaving little of the ancient precon- 
ceptions of differential reality or creative causation. In 
such a science as physics or chemistry, e.g., we are threat- 
ened with the disappearance or dissipation of all stable 
and efficient substances; their place being supplied, or 
their phenomena being theoretically explained, by appeal 
to unremitting processes of inconceivably high-pitched 
consecutive change. 


The Point of View 55 


In the sciences which lie farther afield from the tech- 
nological domain, and which, therefore, in point of habitu- 
ation, are remoter from the center of disturbance, the 
effect of the machine discipline may even yet be scarcely 
appreciable. In such lore.as_ethics, e¢.g., or political 
theory,.or even economics, much of the norms of the 
régime of handicraft still stands over; and very much 
of the institutional preconceptions of natural rights, asso- 
ciated with the régime of handicraft in point of genesis, 
growth and content, is not only still intact in this field of 
inquiry, but it can scarcely even be claimed that there is 
ground for serious apprehension of its prospective obso- 
lescence. Indeed, something even more ancient than 
handicraft and natural rights may be found surviving 
in good vigor in this “ moral” field of inquiry, where 
tests of authenticity and reality are still sought and found 
by those who cultivate these lines of inquiry that lie be- 
yond the immediate sweep of the machine’s discipline. 
Even the evolutionary process of cumulative causation 
as conceived by the adepts of these sciences is infused 
with a preternatural, beneficent trend; so that “ evolu- 
tion” is conceived to mean amelioration or “ improve- 
ment.” The metaphysics of the machine technology has 
not yet wholly, perhaps not mainly, superseded the meta- 
physics of the code of honor in those lines of inquiry 
that have to do with human initiative and aspiration. 
Whether such a shifting of the point of view in these 
sciences shall ever be effected is still an open question. 
Here there still are spiritual verities which transcend the 
sweep of consecutive change. That is to say, there are 
still current habits of thought which definitively predis- 
pose their bearers to bring their inquiries to rest on 
grounds of differential reality and invidious merit. 


WHY IS ECONOMICS NOT AN EVOLUTION- 
ARY SCIENCEES 


M. G. pe LapoucE recently said, “ Anthropology is des- 
tined to revolutionise the political and the social sciences 
as radically as bacteriology has revolutionised the science 
of medicine.” * In so far as he speaks of economics, the 
eminent anthropologist is not alone in his conviction that 
the science stands in need of rehabilitation. His words 
convey a rebuke and an admonition, and in both respects 
he speaks the sense of many scientists in his own and 
related lines of inquiry. It may be taken as the consensus 
of those men who are doing the serious work of modern 
anthropology, ethnology, and psychology, as well as of 
those in the biological sciences proper, that economics is 
ry | 2 na Ie mes euale s £ 2 [OQ 3 q ; iD 


The other political and social sciences come in 
for their share of this obloquy, and perhaps on equally 
cogent grounds. Nor are the economists themselves 
buoyantly indifferent to the rebuke. Probably no econo- 
mist to-day has either the hardihood or the inclination to 
say that the science has now reached a definitive formula- 
tion, either in the detail of results or as regards the fun- 
damental features of theory. The nearest recent ap- 
proach to such a position on the part of an economist of 


1 Reprinted by permission from The Quarterly Journal of 
Economics, vol. xii, July, 1808. 
2°The Fundamental Laws of Anthropo-sociology,” Journal 
of Political Economy, December, 1897, p. 54. The same paper, 
in substance, appears in the Rivista Italiana di Sociologia for 
November, 1897. 
56 


Economics and Evolution 57 


accredited standing is perhaps to be found in Professor 
Marshall’s Cambridge address of a year and a half ago.® 
But these utterances are so far from the jaunty confidence 
shown by the classical economists of half a century ago 
that what most forcibly strikes the reader of Professor 
Marshall’s address is the exceeding modesty and the un- 
called-for humility of the spokesman for the “ old genera- 
tion.” With the economists who are most attentively 
looked to for guidance, uncertainty as to the definitive 
value of what has been and is being done, and as to what 
we may, with effect, take to next, is so common as to 
suggest that indecision is a meritorious work. Even the 
Historical School, who made their innovation with so 
much home-grown applause some time back, have been 
unable to settle down contentedly to the pace which they 
set themselves. 

The men of the sciences that are proud to own them- 
selves “ modern ” find fault with the economists for being 
still content to occupy themselves with repairing a struc- 
ture and doctrines and maxims resting on natural rights, 
utilitarianism, and administrative expediency. This as- 
persion is not altogether merited, but is near enough to the 
mark to carry a sting. These modern sciences are evolu- 
tionary sciences, and their adepts contemplate that charac- 
teristic of their work with some complacency. Economics 
is not an evolutionary science — by the confession of its 
spokesmen ; and the economists turn their eyes with some- 
thing of envy and some sense of baffled emulation to these 
rivals that make broad their phylacteries with the legend, 
© Uprto: date.” 

Precisely wherein the social and political sciences, in- 
cluding economics, fall short of being evolutionary sci- 


3“ The Old Generation of Economists and the New,” Quar- 
terly Journal of Economics, January, 1897, p. 133. 


58 Economics and Evolution 


ences, is not so plain. At least, it has not been satisfac- 
torily pointed out by their critics. Their successful rivals — 
in this matter — the sciences that deal with human nature © 
among the rest—claim as their substantial pews: 
that they are realistic: they deal with facts. But eco-— 
nomics, too, is realistic in this sense: it deals with facts, © 
often in the most painstaking way, and latterly with an ; 
increasingly strenuous insistence on the sole efficacy of ’ 
data. But this “realism” does not make economics an ~ 
evolutionary science. The insistence on data could 
scarcely be carried to a higher pitch than it was carried — 
by the first generation of the Historical School; and yet ~ 
no economics is farther from being an evolutionary sci- — 
ence than the received economics of the Historical School. — 
The whole broad range of erudition and research that — 
engaged the energies of that school commonly falls short 
of being science, in that, when consistent, they have con- — 
tented themselves with an enumeration of data and a 
narrative account of industrial development, and have not — 
presumed to offer a theory of anything or to elaborate — 
their results into a consistent body of knowledge. 

Any evolutionary science, on the other hand, is a close- 
knit body of theory. It is a theory of a process, of an 
unfolding sequence. But here, again, economics seems to 
meet the test in a fair measure, without satisfying its 
critics that its credentials are good. It must be admitted, — 
e.g., that J. S. Mill’s doctrines of production, distribution, 
and exchange, are a theory of certain economic processes, 
and that he deals in a consistent and effective fashion with 
the sequences of fact that make up his subject-matter. 
So, also, Cairnes’s discussion of normal value, of the rate 
of wages, and of international trade, are excellent in- 
stances of a theoretical handling of economic processes 
of sequence and the orderly unfolding development of 


Economics and Evolution 59 


fact. But an attempt to cite Mill and Cairnes as expo- 
nents of an evolutionary economics will produce no better 
effect than perplexity, and not a great deal of that. Very 
much of monetary theory might be cited to the same pur- 
pose and with the like effect. Something similar is true 
even of late writers who have avowed some penchant for 
the evolutionary point of view; as, e.g., Professor Had- 
ley,— to cite a work of unquestioned merit and unusual 
reach. Measurably, he keeps the word of promise to the 
ear; but any one who may cite his Economics as having 
brought political economy into line as an evolutionary sci- 
ence will convince neither himself nor his interlocutor. 
Something to the like effect may fairly be said of the pub- 
lished work of that later English strain of economists rep- 
resented by Professors Cunningham and Ashley, and Mr. 
Cannan, to name but a few of the more eminent figures 
in the group. 

Of the achievements of the classical economists, recent 
and living, the science may justly be proud; but they fall 
short of the evolutionist’s standard of adequacy, not in 
failing to.offer a theory of a process or of a developmental 
relation, but through conceiving their theory in terms 
alien to the evolutionist’s habits of thought. The differ- 
ence between the evolutionary and the pre-evolutionary 
sciences lies not in the insistence on facts. There was a 
great and fruitful activity in the natural sciences in col- 
lecting and collating facts before these sciences took on 


the character which marks them as evolutionary. Nor = 


does the difference lie in the absence of efforts to formu- 
late and explain schemes of process, sequence, growth, 
and development in the pre-evolutionary days. Efforts 
of this kind abounded, in number and diversity ; and many 
schemes of development, of great subtlety and beauty, 
gained a vogue both as theories of organic and inorganic 


Gf 


60 Economics and Evolution 


development and as schemes of the life history of nations — 


and societies. It will not even hold true that our elders 
overlooked the presence of cause and effect in formulating 
their theories and reducing their data to a body of knowl- 
edge. But the terms which were accepted as the defini- 
tive terms of knowledge were in some degree different in 


the early days from what they are now. The terms of — 
thought in which the investigators of some two or three ~ 


generations back definitively formulated their knowledge 
of facts, in their last analyses, were different in kind from 
the terms in which the modern eyolutionist is content to 


formulate his results. The analysis does not run back to © 


the same ground, or appeal to the same standard of final- 
ity or adequacy, in the one case as in the other. 

The difference is a difference of spiritual attitude or 
point of view in the two contrasted generations of scien- 
tists. To put the matter in other words, it is a difference 
in the basis of valuation of the facts for the scientific pur- 
pose, or in the interest from which the facts are appre- 
ciated. With the earlier as with the later generation the 
basis of valuation of the facts handled is, in matters of 
detail, the causal relation which is apprehended to subsist 


‘between them. This is true to the greatest extent for the 


natural sciences. But in their handling of the more com- 
prehensive schemes of sequence and relation — in their 
definitive formulation of the results—the two genera- 


(tions differ. _The modern scientist is unwilling to depart 
, from the test of causal relation or quantitative sequence. 


When he asks the question, Why? he insists on an answer 
in terms of cause and effect..)He wants to reduce his 
solution of all problems to terms of the conservation of 
energy or the persistence of quantity. This is his last 
recourse. And this last recourse has in our time been 
made available for the handling of schemes of develop- 


Economics and Evolution 61 


ment and theories of a comprehensive process by the no- 
tion of a cumulative causation. The great deserts of the 
evolutionist leaders —if they have great deserts as lead- 
ers — lie, on the one hand, in their refusal to go back of 
the colorless sequence of phenomena and seek higher 
ground for their ultimate syntheses, and, on the other 
hand, in their having shown how this colorless impersonal 
sequence of cause and effect can be made use of for 
theory proper, by virtue of its cumulative character. 

For the earlier natural scientists, as for the classical 
economists, this ground of cause and effect is not defini- 
tive. Their sense of truth and substantiality is not satis- 
fied with a formulation of mechanical sequence. The 


the causal rele at any uncture rei icenane 
high Bee ical re irecient, a cde ian a develop- 


mental process especially — must be apprehended in terms 
‘of a consistent propensity tending to some spiritually 


legitimate end. When facts and events have been reduced 
to these terms of fundamental truth and have been made 
to square with the requirements of definitive normality, 


the investigator rests his case. Any causal sequence 
which is apprehended to traverse the imputed propensity 
in events is a “disturbing factor.” Logical congruity 


with the apprehended propensity is, in this view, adequate 
ground of procedure in building up a scheme of knowl- 
edge or of development. The objective point of the 
efforts of the scientists working under the guidance of 
this classical tradition, is to formulate knowledge in terms 
of absolute truth; and this absolute truth is a spiritual 
fact. It means a coincidence of facts with the deliver- 


) 


62 Economics and Evolution 


ances of an enlightened and deliberate common sense. 


The development and the attenuation of this precon- — 


ception of normality or of a propensity in events might be 
traced in detail from primitive animism down through the 
elaborate discipline of faith and metaphysics, overruling 
Providence, order of nature, natural rights, natural law, 
underlying principles. But all that may be necessary here 
is to point out that, by descent and by psychological con- 
tent, this constraining normality is of a spiritual kind. 
It is for the scientific purpose an imputation of spiritual 
coherence to the facts dealt with. | The question of inter- 
est is how this preconception of normality has fared at 
the hands of modern science, and how it has come to be 
superseded in the intellectual primacy by the latter-day 
preconception of a non-spiritual sequence. This ques- 
tion is of interest because its answer may throw light on 
the question as to what chance there is for the indefinite 
persistence of this archaic habit of thought in the methods 
of economic science. 


Under primitive conditions, men stand in immediate 
personal contact with the material facts of the environ- 
ment; and the force and discretion of the individual in 
shaping the facts of the environment count obviously, and 
to all appearance solely, in working out the conditions of 
life. There is little of impersonal or mechanical se- 
quence visible to primitive men in their every-day life; 
and what there is of this kind in the processes of brute 
nature about them is in large part inexplicable and passes 
for inscrutable. It is accepted as malignant or beneficent, 
and is construed in the terms of personality that are 
familiar to all men at first hand,— the terms known to 
all men by first-hand knowledge of their own acts. The 
inscrutable movements of the seasons and of the natural 


Se 


Economics and Evolution 63 


forces are apprehended as actions guided by discretion, 
will power, or propensity looking to an end, much as 
human actions are. The processes of inanimate nature 
are agencies whose habits of life are to be learned, and 
who are to be coerced, outwitted, circumvented, and 
turned to account, much as the beasts are. At the same 
time the community is small, and the human contact of 
the individual is not wide. Neither the industrial life nor 
the non-industrial social life forces upon men’s attention 
the ruthless impersonal sweep of events that no man can 
withstand or deflect, such as becomes visible in the more 
complex and comprehensive life process of the larger 
community of a later day. There is nothing decisive to 
hinder men’s knowledge of facts and events being formu- 
lated in terms of personality — in terms of habit and pro- 
pensity and will power. 

As time goes on and as the situation departs from this 
archaic character,— where it does depart from it,— the 
circumstances which condition men’s systematisation of 
facts change in such a way as to throw the impersonal 
character of the sequence of events more and more into 
the foreground. The penalties for failure to apprehend 
facts in dispassionate terms fall surer and swifter. The 
sweep of events is forced home more consistently on men’s 
minds. The guiding hand of a spiritual agency or a pro- 
pensity in events becomes less readily traceable as men’s 
knowledge of things grows ampler and more searching. 
In modern times, and particularly in the industrial coun- 
tries, this coercive guidance of men’s habits of thought 
in the realistic direction has been especially pronounced ; 
and the effect shows itself in a somewhat reluctant but 
cumulative departure from the archaic point of view. 
The departure is most visible and has gone farthest in 
those homely branches of knowledge that have to do 


64 Economics and Evolution 


immediately with modern mechanical processes, such as 
engineering designs and technological:contrivances gen- 
erally. Of the sciences, those have wandered farthest on 
this way (of integration or disintegration, according as 
one may choose to view it) that have to do with mechani- 
cal sequence and process; and those have best and longest 
retained the archaic point of view intact which — like the 
moral, social, or spiritual sciences —have to do with 
process and sequence that is less tangible, less traceable by 
the use of the senses, and that therefore less immediately 
forces upon the attention the phenomenon of sequence as 


contrasted with that of propensity. 
~ There is no abrupt transition from the pre-evolutionary 


to the post-evolutionary standpoint. Even in those nat- 
ural sciences which deal with the processes of life and the 
evolutionary sequence of events the concept of dispassion- 
ate cumulative causation has often and effectively been 
helped out by the notion that there is in all this some sort 
of a meliorative trend that exercises a constraining guid- 
ance over the course of causes and effects. The faith in 
this meliorative trend as a concept useful to the science 
has gradually weakened, and it has repeatedly been dis- 
avowed; but it can scarcely be said to have yet disap- 
peared from the field. 

The process of change in the ooiall of view, or in the 
terms of definitive formulation of knowledge, is a gradual 
one; and all the sciences have shared, though in an un- 
equal degree, in the change that is going forward. Eco- 
nomics is not an exception to the rule, but it still shows 
too many reminiscences of the “natural” and the-“nor-. 
mal,” of “verities” and “tendencies,” of “controlling 
principles ” and “ disturbing causes” to be classed as an 
evolutionary science. This history of the science shows 
a long and devious course of disintegrating animism,— 


Economics and Evolution 65 


from the days of the scholastic writers, who discussed 
usury from the point of view of its relation to the divine 
suzerainty, to the Physiocrats, who rested their case on 
an “ordre naturel” and a “loi naturelle” that decides 
what is substantially true and, in a general way, guides 
the course of events by the constraint of logical congru- 
ence. There has been something of a change from Adam 
Smith, whose recourse in perplexity was to the guidance 
of “an unseen hand,” to Mill and Cairnes, who formu- 
lated the laws of “ natural” wages and “normal”’ value, 
and the former of whom was so well content with his 
work as to say, “ Happily, there is nothing in the laws of 
Value which remains for the present or any future writer 
to clear up: the theory of the subject is complete.”* But 
the difference between the earlier and the later point of 
view is a difference of degree rather than of kind. 

The standpoint of the classical economists, in their 
higher or definitive syntheses and generalisations, may not 
inaptly be called the standpoint of ceremonial adequacy. 
The ultimate laws and principles which they formulated 
| were laws of the normal or the natural, according to a 
\ preconception > eat the ends to which, in the nature 


to > work out narra 
struc >mmon sen the time accepts as the ade- 
ci ciaieemrinoioteeomemratier It is a projection 
of the accepted ideal of conduct. This ideal of conduct 
‘\ is made to serve as a canon of truth, to the extent that the 
‘) investigator contents himself with an appeal to its legitima- 
, tion for premises that run back of the facts with which he 


Yi )) is immediately dealing, for the “ controlling principles ” 
Ny that are conceived intangibly to underlie the process dis- 
vy. cussed, and for the “tendencies” that run beyond the 


4 Political Economy, Book III, chap. i. 


66 Economics and Evolution 


situation as it lies before him. As instances of the use 
of this ceremonial canon of knowledge may be cited the 
“conjectural history’ that plays so large a part in the 
classical treatment of economic institutions, such as the 
normalized accounts of the beginnings of barter in the 
transactions of the putative hunter, fisherman, and boat- 
builder, or the man with the plane and the two planks, 
or the two men with the basket of apples and the basket 
of nuts.> Of a similar import is the characterisation of 
money as “ the great wheel of circulation” *® or as “the 
medium of exchange.” Money is here discussed in terms 
of the end which, “in the normal case,” it should work 
out according to the given writer’s ideal of economic life, 
rather than in terms of causal relation. 

With later writers especially, this terminology is no 
doubt to be commonly taken as a convenient use of meta- 
phor, in which the concept of normality and propensity to 
an end has reached an extreme ‘attenuation. But it is 
precisely in this use of figurative terms for the formula- 
tion of theory that the classical normality still lives its 
attenuated life in modern economics; and it is this facile 
recourse to inscrutable figures of speech as the ultimate 
terms of theory that has saved the economists from being 
dragooned into the ranks of modern science. The meta- 
phors are effective, both in their homiletical use and as a 
labor-saving device,— more effective than their user de- 
signs them to be. By their use the theorist is enabled 
serenely to enjoin himself from following out an elusive 
train of causal sequence. He is also enabled, without 
misgivings, to construct a theory of such an institution 


5 Marshall, Principles of Economics (2d ed.), Book V, chap. 


ii, p. 395, note. 
6 Adam Smith, Wealth of Nations (Bohn ed.), Book II, chap. 
ii, p. 289. 


ES 


Economics and Evolution 67 


aS money or wages or land-ownership without descending | 
to a consideration of the living items concerned, except 
for convenient corroboration of his normalised scheme of 
symptoms. By this method the theory of an institution 
or a phase of life may be stated in conventionalised terms 
of the apparatus whereby life is carried on, the apparatus 
being invested with a tendency to an equilibrium at the | . 
normal, and the theory being a formulation of the condi- ~ ' 
tions under which this putative equilibrium supervenes. 
In this way we have come into the usufruct of a cost-of- 
production theory of value which is pungently reminiscent 
of the time when Nature abhorred a vacuum. The ways 
and means and the mechanical structure of industry are 


observed motions of this mechanical apparatus are then 
reduced to a normalised scheme of relations. The scheme 


Ss 

S formulated in a conventionalised nomenclature, and the 
= 

8 


so arrived at is spiritually binding on the behavior of the 
phenomena contemplated. With this normalised scheme 
as a guide, the permutations of a given segment of the 
apparatus are worked out according to the values assigned 
the several items and features comprised in the calcula- 
tion ; and a ceremonially consistent formula is constructed 
to cover that much of the industrial field. This is the 
deductive method. The formula is then tested by com- 
parison with observed permutations, by the polariscopic 
use of the “ normal case”; and the results arrived at are 
thus authenticated by induction. Features of the process 
that do not lend themselves to interpretation in the terms 
of the formula are abnormal cases and are due to disturb- 
ing causes. In all this the agencies or forces causally at 
work in the economic life process are neatly avoided. 
The outcome of the method, at its best, is a body of log- 
ically consistent propositions concerning the normal rela- 
tions of things—a system of economic taxonomy. At 


t 
ss VA 
ut \U 
ae) aN 
a (\ Si 
OPI age Ma 
‘ es 
§ i Me, 
g SO Se a) 
AM! Se 
CW 
eS + 
NY 
Wie 
\ a 
C \ 
Se | 


f 


68 Economics and Evolution 


its worst, it is a body of maxims for the conduct of busi- 
ness and a polemical discussion of disputed points of 


policy. 
In all this, economic science is living over again in its 


/turn the experiences which the natural sciences passed 


through some time back. In the natural sciences the 
work of the taxonomist was and continues to be of great 
value, but the scientists grew restless under the régime of 
symmetry and system-making. They took to asking why, 
and so shifted their inquiries from the structure of the 
coral reefs to the structure and habits of life of the polyp 
that lives in and by them. In the science of plants, sys- 
tematic botany has not ceased to be of service; but the 
stress of investigation and discussion among the botanists 
to-day falls on the biological value of any given feature of 
structure, function, or tissue rather than on its taxonomic 
bearing. All the talk about cytoplasm, centrosomes, and 
karyokinetic process, means that the inquiry now looks 
consistently to the life process, and aims to explain it in 
terms of cumulative causation. 

What may be done in economic science of the taxo- 
nomic kind is shown at its best in Cairnes’s work, where 
the method is well conceived and the results effectively 
formulated and applied. Cairnes handles the theory of 
the normal case in economic life with a master hand. In 
his discussion the metaphysics of propensity and tenden- 
cies no longer avowedly rules the formulation of theory, 
nor is the inscrutable meliorative trend of a harmony of 
interests confidently appealed to as an engine of definitive 
use in giving legitimacy to the economic situation at a 
given time. There is less of an exercise of faith in 
Cairnes’s economic discussions than in those of the writers 
that went before him. The definitive terms of the formu- 
lation are still the terms of normality and natural law, but 


Economics and Evolution 69 


the metaphysics underlying this appeal to normality is so 
far removed from the ancient ground of the beneficent 
“order of nature” as to have become at least nominally 
impersonal and to proceed without a constant regard to 
the humanitarian bearing of the “tendencies ” which it 
formulates. The metaphysics has been attenuated to 
something approaching in colorlessness the naturalist’s 
conception of natural law. It is a natural law which, in 
the guise of “controlling principles,” exercises a con- 
straining surveillance over the trend of things; but it is no 
longer conceived to exercise its constraint in the interest 
of certain ulterior human purposes. The element of 
beneficence has been well-nigh eliminated, and the system 
is formulated in terms of the system itself. Economics as 
it left Cairnes’s hand, so far as his theoretical work is con- 
cerned, comes near being taxonomy for taxonomy’s sake. 

No equally capable writer has come as near making 
economics the ideal “ dismal” science as Cairnes in his 
discussion of pure theory. In the days of the early classi- 
cal writers economics had a vital interest for the laymen 
of the time, because it formulated the common sense 
metaphysics of the time in its application to a department 
of human life. But in the hands of the later classical 
writers the science lost much of its charm in this regard. 
It was no longer a definition and authentication of the 
deliverances of current common sense as to what ought to 
come to pass; and it, therefore, in large measure lost the 
support of the people out of doors, who were unable to 
take an interest in what did not concern them; and it 
was also out of touch with that realistic or evolutionary 
habit of mind which got under way about the middle of 
the century in the natural sciences. It was neither 
vitally metaphysical nor matter-of-fact, and it found com- 
fort with very few outside of its own ranks. Only for 


70 Economics and Evolution 


those who by the fortunate accident of birth or education 
have been able to conserve the taxonomic animus has the 
science during the last third of a century continued to be 
of absorbing interest. The result has been that from the 
time when the taxonomic structure stood forth as a com- 
pleted whole in its symmetry and stability the economists 
themselves, beginning with Cairnes, have been growing 
restive under its discipline of stability, and have made 
many efforts, more or less sustained, to galvanise it into 
movement. At the hands of the writers of the classical 
line these excursions have chiefly aimed at a more com- 
plete and comprehensive taxonomic scheme of permuta-' 
tions ; while the historical departure threw away the taxo- 
nomic ideal without getting rid of the preconceptions on 
which it is based; and the later Austrian group struck 
out on a theory of process, but presently came to a full 
stop because the process about which they busied ‘them- 
selves was not, in their apprehension of it, a cumulative 


\ or unfolding sequence. 


But what does all this signify? If we are getting rest- 
less under the taxonomy of a monocotyledonous wage 
doctrine and a cryptogamic theory of interest, with in- 
volute, loculicidal, tomentous and moniliform variants, 
what is the cytoplasm, centrosome, or karyokinetic proc- 
ess to which we may turn, and in which we may find sur- 
cease from the metaphysics of normality and controlling 
principles? What are we going to do about it?) The 
question is rather, What are we doing about it? * There 
is the economic life process still in great measure await- 
ing theoretical formulation. The active material in which 
the economic process goes on is the human material of 
the industrial community. For the purpose of economic 


_ science the process of cumulative change that is to be 


Economics and Evolution AL 


N\accounted for is the sequence of change in the method 
L, of doing things,— the methods of dealing with the ma- 
terial means of life. 

What has been done in the way of inquiry into this 
economic life process? The ways and means of turning 
material objects and circumstances to account lie before 
the investigator at any given point of time in the form of 
mechanical contrivances and arrangements for compassing 
certain mechanical ends. It has therefore been easy to 
accept these ways and means as items of inert matter 
having a given mechanical structure and thereby serving 
the material ends of man. As such, they have been sched- 


pes 
™~ 
~ 


uled and graded by the economists under the head of Sy 


capital, this capital being conceived as a mass of material w 
objects serviceable for human use. This is well enough 
for the purposes of taxonomy ; but it is not an effective | 


method of conceiving the matter for the purpose of a 


theory of the developmental process. For the latter pur- 
pose, when taken as items in a process of cumulative 
change or as items in the scheme of life, these produc- 
tive goods are facts of human knowledge, skill, and pre- 
dilection ; that is to say, they are, substantially, prevalent 
habits of thought, and it is as such that they enter into 
the process of industrial development. The physical 
properties of the materials accessible to man are em] 
stants: it is the human agent that changes,— his insight 
and his appreciation of what these things can be used for 
is what develops. The accumulation of goods already on 
hand conditions his handling and utilisation of the mate- 
rials offered, but even on this side —the “limitation of 
industry by capital ”— the limitation imposed is on what 
\ men can do and on the methods of doing it. The changes 


that take place in the mechanical contrivances are an 
S expression of changes in the human factor. Changes in 
PMN 2 Fy 1 S| 
ES SIRE <a. s a 
yw So WW WV ss L 
. SS : x var | ~~ Qu > 
we b S —y CSS 
NOY +N i 


~ 


\ 72 Economics and Evolution 
\ 


: 


y. the material facts breed further change only through the 


therefore, that the motor forces of the process of eco 
LK nomic development must be studied if they are to be stud 


human factor. It is in the human material that the con- 
tinuity of development is to be looked for; and it is here, 


ied in action at all. Economic action must be the subject- | 
matter of the science if the science is to fall into line as 


an evolutionary science. 


' Nothing new has been said in all this. But the fact is 
-all the more significant for being a familiar fact. It is a 
fact recognised by common consent throughout much of 
the later economic discussion, and this current recognition 
of the fact is a long step towards centering discussion and 
inquiry upon it. If economics is to follow the lead or 
the analogy of the other sciences that have to do with a 
life process, the way is plain so far as regards the general 


direction in which the move will be made. 
The economists of the classical trend have made no seri 


4 


ous attempt to depart from the standpoint of taxonomy 
and make their science a genetic account of the economic 
life process. As has just been said, much the same is true 
for the Historical School. The latter have attempted an 


: account of developmental sequence, but they have fol 
lowed the lines of pre-Darwinian speculations on devel 


opment rather than lines which modern science would 
recognise as evolutionary. They have given a narrative 


survey of phenomena, not a genetic account of an unfold 


ing process. In this work they have, no doubt, achieved 
results of permanent value; but the results achieved are 
scarcely to be classed as economic theory. On the other 
hand, the Austrians and their precursors and their co- 
adjutors in the value discussion have taken up a detached 
portion of economic theory, and have inquired with great 
nicety into the process by which the phenomena within 


Economics and Evolution 73 


their limited field are worked out. The entire discussion 
of marginal utility and subjective value as the outcome of 
a valuation process must be taken as a genetic study of 
this range of facts. But here, again, nothing further has 
come of the inquiry, so far as regards a rehabilitation of 
economic theory as a whole. Accepting Menger as their 
spokesman on this head, it must be said that the Aus- 
trians have on the whole showed themselves unable to 
break with the classical tradition that economics is a 
taxonomic science. 

The reason for the Austrian failure seems to lie in a 
faulty conception of human nature,— faulty for the pres- 
ent purpose, however adequate it may be for any other. 
In all the received formulations of economic theory, 
whether at the hands of English economists or those of 
the Continent, the human material with which the inquiry 
is concerned is conceived in hedonistic terms; that is to 
say, in terms of a passive and substantially inert and im- 
mutably given human nature. The psychological and an- 
thropological preconceptions of the economists have been 
those which were accepted by the psychological and social 
sciences some generations ago. The hedonistic concep- 
tion of man is that of a lightning calculator of pleas- 
ures and pains, who oscillates like a homogeneous glob- 
ule of desire of happiness under the impulse of stimuli 
that shift him about the area, but leave him intact.!\ He 
has neither antecedent nor consequent. He is an isolated, 
definitive human datum, in stable equilibrium except for 
the buffets of the impinging forces that displace him in 
one direction or another. Self-imposed in elemental 
space, he spins symmetrically about his own spiritual axis 
until the parallelogram of forces bears down upon him, 
whereupon he follows the line of the resultant. When 
the force of the impact is spent, he comes to rest, a self- 


74 Economics and Evolution 


contained globule of desire as before. Spiritually, the 
hedonistic man is not a prime mover. ° He is not the seat 
of a process of living, except in the sense that he is sub- 
ject to a series of permutations enforced upon him by 
circumstances external and alien to him. 

The later psychology, reénforced by modern an- 
thropological research, gives a different conception of 
human nature. According to this conception, it is the 
characteristic of man to do something, not simply to suffer 
pleasures and pains through the impact of suitable forces. 
He is not simply a bundle of desires that are to be sat- 
urated by being placed in the path of the forces of the en- 
vironment, but rather a coherent structure of propensities 
and habits which seeks realisation and expression in an 
unfolding activity. According to this view, human actiy-_ 
ity, and economic activity among the rest, is not appre- 
hended as something incidental to the process of saturat- 
ing given desires. The activity is itself the substantial 
fact of the process, and the desires under whose guid- 
ance the action takes place are circumstances of tempera- 
ment which determine the specific direction in which the 
activity will unfold itself in the given case. These cir- 
cumstances of temperament are ultimate and definitive 
for the individual who acts under them, so far as regards 
his attitude as agent in the particular action in which he 
is engaged. But, in the view of the science, they are ele- 
ments of the existing frame of mind of the agent, and are 
the outcome of his antecedents and his life up to the point 
at which he stands. They are the products of his heredi- 
tary traits and his past experience, cumulatively wrought 
out under a given body of traditions, conventionalities, 
and material circumstances; and they afford the point of 
departure for the next step in the process. The economic 
life history of the individual is a cumulative process of: 


- 


ee » Economics and Evolution 75 


Deics of means to ends that cumulatively change as 


S 


’ 


- 


the process goes on, both the agent and his environment 
being at any point the outcome of the last process. His 
methods of life to-day are enforced upon him by his hab- 
its of life carried over from yesterday and by the cir- 
cumstances left as the mechanical residue of the life of 
yesterday. 

What is true of the individual in this respect is true 
of the group in which he lives. All economic change is 
a change in the economic community,— a change in the 
community’s methods of turning material things to ac- 
count. The change is always in the last resort a change 
in habits of thought. This is true even of changes in the 
mechanical processes of industry. A given contrivance 
for effecting certain material ends becomes a circumstance 
which affects the further growth of habits of thought — 
habitual methods of procedure — and so becomes a point 
of departure for further development of the methods of 


essing the ends sought and for the further variation 


of ends that are sought to be compassed. In all this flux 


there is no definitively adequate method of life and no 


\ 


definitive or absolutely worthy end of action, so far as » 


concerns the science which sets out to formulate a theory 
of the process of economic life. What remains as a hard 
and fast residue is the fact of activity directed to an ob- 
jective end. Economic action is teleological, in the sense/ 
that men always and everywhere seek to do something. 
What, in specific detail, they seek, is not to be answered 
except by a scrutiny of the details of their activity; but, 
so long as we have to do with their life as members of 
the economic community, there remains the generic fact 
that their life is an unfolding activity of a teleological 
kind. 

It may or may not be a teleological process in the sense 


Xt 
a0) 
ww 
\) 
JOT 
(\ x 
(< 
Um 8 
AN 
‘ *¥ r 
~~ 
\ 
4 \ 4 
ww 


76 Economics and Evolution 


that it tends or should tend to any end that is conceived 
to be worthy or adequate by the inquirer or by the con- 


sensus of inquirers. Whether it is or is not, is a question — 


with which the present inquiry is not concerned ; and it is 


| 


; 


also a question of which an evolutionary economics need — 
take no account. The question of a tendency in events — 
can evidently not come up except on the ground of some — 
preconception or prepossession on the part of the person — 
looking for the tendency. In order to search for a tend- — 


ency, we must be possessed of some notion of a definitive 


end to be sought, or some notion as to what is the legit- 
imate trend of events. The notion of a legitimate trend — 


in a course of events is an extra-evolutionary preconcep- 
tion, and lies outside the scope of an inquiry into the 
causal sequence in any process. The evolutionary point 
of view, therefore, leaves no place for a formulation%of 
natural laws in terms of definitive normality, whether in 
economics or in any other branch of inquiry. Neither 


does it leave room for that other question of normality. 4 


What should be.the end of the developmental process 
under discussion? 

The economic life history of any community is its life 
history in so far as it is shaped by men’s interest in the 
material means of life. This economic interest has 
counted for much in shaping the cultural growth of all 
communities. Primarily and most obviously, it has 
guided the formation, the cumulative growth, of that 
range of conventionalities and methods of life that are 
currently recognized as economic institutions; but the 
same interest has also pervaded the community’s life and 
its cultural growth at points where the resulting structural 
features are not chiefly and most immediately of an 
economic bearing. The economic interest goes with men 
through life, and it goes with the race throughout its pro- 


a 


Economics and Evolution 77 


cess of cultural development. It affects the cultural 
structure at all points, so that all institutions may be said 
to be in some measure economic institutions. This is 
necessarily the case, since the base of action —the point 
of departure — at any step in the process is the entire 
organic complex of habits of thought that have heen 
shaped by the past process. The economic interest does 


activity-earried out by the individual proceeds. The in- 
dividual is but a single agent in each case; and he enters 
into each successive action as a whole, although the 
specific end sought in a given action may be sought 
avowedly on the basis of a particular interest; as e.g., 
the economic, esthetic, sexual, humanitarian, devo- 
tional interests. Since each of these passably isolable 
interests is a propensity of the organic agent man, 
with his complex of habits of thought, the expression 
of each is affected by habits of life formed under the 
guidance of all the rest. There is, therefore, no neatly 
isolable range of cultural phenomena that can be rigor- 
ously set apart under the head of economic institutions, 
although a category of “ economic institutions ” may be of 
service as a convenient caption, comprising those institu- 
tions in which the economic interest most immediately 
and consistently finds expression, and which most imme- 
diately and with the least limitation are of an economic 
bearing. 

From what has been said it appears that an evolutionary , 
economics must be the theory of a process of cultural | 
growth as determined by the economic interest, a theory 

' of a cumulative sequence of economic institutions stated 
in terms of the process itself. Except for the want of 
\ sce to do here what should be done in some detail if it 


78 Economics and Evolution 


is done at all, many efforts by the later economists in this 
direction might be cited to show the trend of economic 
discussion in this direction. There is not a little evidence 
to this effect, and much of the work done must be rated 
as effective work for this purpose. Much of the work of 
the Historical School, for instance, and that of its later 
exponents especially, is too noteworthy to be passed over 
in silence, even with all due regard to the limitations of 
space. 

We are now ready to return to the question why eco- | 
nomics is not an evolutionary science. It is necessarily 
the aim of such an economics to trace the cumulative 
working-out of the economic interest in the cultural se- 
quence. It must be a theory of the economic life process 
of the race or the community. The economists have ac- 
cepted the hedonistic preconceptions concerning human . 
nature and human action, and the conception of the eco- 
nomic interest which a hedonistic psychology gives does 
not afford material for a theory of the development of 
human nature. Under hedonism the economic interest is _ 
not conceived in terms of action. It is therefore not — 
readily apprehended or appreciated in terms of a cumula- 
tive growth of habits of thought, and does not provoke, 
even if it did lend itself to, treatment by the evolutionary — 
method. At the same time the anthropological precon- 
ceptions current in that common-sense apprehension of 
human nature to which economists have habitually turned 
has not enforced the formulation of human nature in 
terms of a cumulative growth of habits of life. These re- 
ceived anthropological preconceptions are such as have 
made possible the normalized conjectural accounts of 
primitive barter with which all economic readers are fa- 
miliar, and the no less normalized conventional derivation 
of landed property and its rent, or the sociologico-philo- 


_— 


SES oe 


Economics and Evolution 79 


sophical discussions of the “function” of this or that 
class in the life of society or of the nation. 

The premises and the point of view required for an evo- 
lutionary economics have been wanting. The economists 
have not had the materials for such a science ready to 
their hand, and the provocation to strike out in such a 
direction has been absent. Even if it has been possible 
at any time to turn to the evolutionary line of speculation 
in economics, the possibility of a departure is not enough 
to bring it about. So long as the habitual view taken of a 
given range of facts is of the taxonomic kind and the 
material lends itself to treatment by that method, the tax- 
onomic method is the easiest, gives the most gratifying 
immediate results, and bests fits into the accepted body of 
knowledge of the range of facts in question. This has 
been the situation in economics. The other sciences of 
its group have likewise been a body of taxonomic disci- 
pline, and departures from the accredited method have 
lain under the odium of being meretricious innovations. 
The well-worn paths are easy to follow and lead into good 
company. Advance along them visibly furthers the ac- 
credited work which the science has in hand. Divergence 
from the paths means tentative work, which is necessarily 
slow and fragmentary and of uncertain value. 

It is only when the methods of the science and the syn- 
theses resulting from their use come to be out of line with 
habits of thought that prevail in other matters that the 
scientist grows restive under the guidance of the received 
methods and standpoints, and seeks a way out. Like 
other men, the economist is an individual with but one 
intelligence. He is a creature of habits and propensities 
given through the antecedents, hereditary and cultural, of 
which he is an outcome; and the habits of thought formed 
in any one line of experience affect his thinking in any 


80 Economics and Evolution 


other. Methods of observation and of handling facts that 
are familiar through habitual use in the general range of 
knowledge, gradually assert themselves in any given spe- 
cial range of knowledge. They may be accepted slowly 
and with reluctance where their acceptance involves inno- 
vation ; but, if they have the continued backing of the gen- 
eral body of experience, it is only a question of time 
when they shall come into dominance in the special field. 
The intellectual attitude and the method of correlation en- 
forced upon us in the apprehension and assimilation of 
facts in the more elementary ranges of knowledge that 
have to do with brute facts assert themselves also when 
the attention is directed to those phenomena of the life 
process with which economics has to do; and the range 
of facts which are habitually handled by other methods 
than that in traditional vogue in economics has now be- 
come so large and so insistently present at every turn that 
we are left restless, if the new body of facts cannot be 
handled according to the method of mental procedure 
which is in this way becoming habitual. 

In the general body of knowledge in modern times the 
facts are apprehended in terms of causal sequence. This 
is especially true of that knowledge of brute facts which is 
shaped by the exigencies of the modern mechanical indus- 
try. To men thoroughly imbued with this matter-of-fact 
habit of mind the laws and theorems of economics, and 
of the other sciences that treat of the normal course of 
things, have a character of “ unreality ” and futility that 
bars out any serious interest in their discussion. The 
~laws and theorems are “ unreal ” to them because they are 
not to be apprehended in the terms which these men make 
use of in handling the facts with which they are perforce 
habitually occupied. The same matter-of-fact spiritual 
attitude and mode of procedure have now made their way 


Economics and Evolution 81 


well up into the higher levels of scientific knowledge, even 
in the sciences which deal in a more elementary way with 
the same human material that makes the subject-matter of 
economics, and the economists themselves are beginning 
to feel the unreality of their theorems about “ normal” 
cases. Provided the practical exigencies of modern in- | 
dustrial life continue of the same character as they now | 
are, and so continue to enforce the impersonal method of._ 
knowledge, it is only a question of time when that (sub- | 
stantially animistic) habit of mind which proceeds on the’ 
notion of a definitive normality shall be displaced in the 
field of economic inquiry by that (substantially material- 
istic) habit of mind which seeks a comprehension of facts 
in terms of a cumulative sequence. 

The later method of apprehending and assimilating 
facts and handling them for the purposes of knowledge 
may be better or worse, more or less worthy or adequate, 
than the earlier; it may be of greater or less ceremonial 
or esthetic effect; we may be moved to regret the incur- 
sion of underbred habits of thought into the scholar’s 
domain. But all that is beside the present point. Under 
the stress of modern technological exigencies, men’s every- 
day habits of thought are falling into the lines that in the 
sciences constitute the evolutionary method; and knowl- 
edge which proceeds on a higher, more archaic plane is 
becoming alien and meaningless to them. The social and 
political sciences must follow the drift, for they are al- 
ready caught in it. 


THE PRECONCEPTIONS OF ECONOMIC 
SCIENCE? 


I 


In an earlier paper? the view has been expressed that 
the economics handed down by the great writers of a past 
generation is substantially a_taxonomic science. A view 
of much the same purport, so far as concerns the point 
here immediately in question, is presented in an admir- 
ably lucid and cogent way by Professor Clark in a recent 
number of this journal. There is no wish hereby to 
burden Professor Clark with a putative sponsorship of 
any ungraceful or questionable generalisations reached in 
working outward from this main position, but expression 
may not be denied the comfort which his unintended au- 
thentication of the main position affords. It is true, Pro- 
fessor Clark does not speak of taxonomy, but employs the 
term “ statics,” which is perhaps better suited to his imme- 
diate purpose. Nevertheless, in spite of the high author- 
ity given the term “ statics,” in this connection, through 
its use by Professor Clark and by other writers eminent in 
the science, it is fairly to be questioned whether the term 
can legitimately be used to characterize the received eco- 
nomic theories. The word is borrowed from the jargon 
of physics, where it is used to designate the theory of 

1 Reprinted by permission from The Quarterly Journal of 
Economics, vol. xiii, Jan., 1899. 

2“ Why is Economics not an Evolutionary Science?” Quar- 
terly Journal of Economics, July, 1808. 


3“ The Future of Economic Theory,” ibid., October, 1808. 
82 


Preconceptions: I 83 


bodies at rest or of forces in equilibrium. But there is 
much in the received economic theories to which the anal- 
ogy of bodies at rest or of forces in equilibrium will not 
apply. It is perhaps not too much to say that those arti- 
cles of economic theory that do not lend themselves to 
this analogy make up the major portion of the received 
doctrines. So, for instance, it seems scarcely to the point 
to speak of the statics of production, exchange, consump- 
tion, circulation. There are, no doubt, appreciable ele- 
ments in the theory of these several processes that may 
fairly be characterized as statical features of the theory; 
but the doctrines handed down are after all, in the main, 
theories of the process discussed under each head, and 
the theory of a process does not belong in statics. The 
epithet “statical” would, for instance, have to be 
wrenched somewhat ungently to make it apply to Ques- 
nay’s classic Tableau Economique or to the great body of 
Physiocratic speculations that take their rise from it. 
The like is true for Books II. and III. of Adam Smith’s 
Wealth of Nations, as also for considerable portions of 
Ricardo’s work, or, to come down to the present genera- 
tion, for much of Marshall’s Principles, and for such a 
modern discussion as Smart’s Studies in Economics, as 
well as for the fruitful activity of the Austrians and of 
the later representatives of the Historical School. 

But to return from this terminological digression. 
While economic science in the remoter past of its history 
has been mainly of a taxonomic character, later writers of 
all schools show something of a divergence from the taxo- 
nomic line and an inclination to make the science a genetic 
account of the economic life process, sometimes even 
without an ulterior view to the taxonomic value of the 
results obtained. This divergence from the ancient 
canons of theoretical formulation is to be taken as an 


84 Preconceptions: I 


episode of the movement that is going forward in latter- 
day science generally; and the progressive change which 
thus affects the ideals and the objective point of the mod- 
ern Sciences seems in its turn to be an expression of that 
matter-of-fact habit of mind which the prosy but exacting 
exigencies of life in a modern industrial community 
breed in men exposed to their unmitigated impact. 

In speaking of this matter-of-fact character of the mod- 
ern sciences it has been broadly characterized as “ evolu- 
tionary ” ; and the evolutionary method and the evolution- 
ary ideals have been placed in antithesis to the taxonomic 
methods and ideals of pre-evolutionary days. But the 
characteristic attitude, aims, and ideals which are so desig- 
nated here are by no means peculiar to the group of sci- 
ences that are professedly occupied with a process of de- 
velopment, taking that term in its most widely accepted 
meaning. The latter-day inorganic sciences are in this 
respect like the organic. They occupy themselves with 
“dynamic ” relations and sequences. The question which 
they ask is always, What takes place next, and why? 
Given a situation wrought out by the forces under inquiry, 
what follows as the consequence of the situation so 
wrought out? or what follows upon the accession of a 
further element of force? Even in so non-evolutionary a 
science as inorganic chemistry the inquiry consistently 
runs on a process, an active sequence, and the value of the 
resulting situation as a point of departure for the next 
step in an interminable cumulative sequence. The last 
step in the chemist’s experimental inquiry into any sub- 
stance is, What comes of the substance determined? 
What will it do? What will it lead to, when it is made 
the point of departure in further chemical action? There 
is no ultimate term, and no definitive solution except in 
terms of further action. The theory worked out is al- 


ee ee 


a 


Preconceptions: I 85 


ways a theory of a genetic succession of phenomena, and 
the relations determined and elaborated into a. body of 
doctrine are always genetic relations. In modern chemis- 
try no cognisance is taken of the honorific bearing of 
reactions or molecular formule. The modern chemist, as 
contrasted with his ancient congener, knows nothing of 
the worth, elegance, or cogency of the relations that may 
subsist between the particles of matter with which he 
busies himself, for any other than the genetic purpose. 
The spiritual element and the elements of worth and pro- 
pensity no longer count. Alchemic symbolism and the 
hierarchical glamour and virtue that once hedged about 
the nobler and more potent elements and reagents are al- 
most altogether a departed glory of the science. Even the 
modest imputation of propensity involved in the construc- 
tion of a scheme of coercive normality, for the putative 
guidance of reactions, finds little countenance with the 
later adepts of chemical science. The science has out- 
lived that phase of its development at which the taxo- 
nomic feature was the dominant one. 

In the modern sciences, of which chemistry is one, 
there has been a gradual shifting of the point of view 
from which the phenomena which the science treats of are 
apprehended and passed upon; and to the historian of 
chemical science this shifting of the point of view must 
be a factor of great weight in the development of chemical 
knowledge. Something of a like nature is true for eco- 
nomic science; and it is the aim here to present, in out- 
line, some of the successive phases that have passed over 
the spiritual attitude of the adepts of the science, and to 
point out the manner in which the transition from one 
point of view to the next has been made. 


As has been suggested in the paper already referred to, 


86 Preconceptions: I 


q 


| 


the characteristic spiritual attitude or point of view of al 


given generation or group of economists is shown not so 
much in their detail work as in their higher syntheses — 
the terms of their definitive formulations —the grounds 
of their final valuation of the facts handled for purpose 
of theory. This line of recondite inquiry into the spirit- 
ual past and antecedents of the science has not often been 
pursued seriously or with singleness of purpose, perhaps 
because it is, after all, of but slight consequence to the 
practical efficiency of the present-day science. Still, not 
a little substantial work has been done towards this end 
by such writers as Hasbach, Oncken, Bonar, Cannan, and 
Marshall. And much that is to the purpose is also due to 
writers outside of economics, for the aims of economic 
speculation have never been insulated from the work 
going forward in other lines of inquiry. As would neces- 
sarily be the case, the point of view of economists has 
always been in large part the point of view of the enlight- 
ened common sense of their time. The spiritual attitude 
of a given generation of economists is therefore in good 
part a special outgrowth of the ideals and preconceptions 
current in the world about them. 

So, for instance, it is quite the conventional thing to 
say that the speculations of the Physiocrats were domi- 


nated and shaped by the preconception of Natural Rights. — 


Account has been taken of the effect of natural-rights 
preconceptions upon the Physiocratic schemes of policy 
and economic reform, as well as upon the details of their 
doctrines.* But little has been said of the significance of 
these preconceptions for the lower courses of the Physio- 
crats’ theoretical structure. And yet that habit of mind 


4See, for instance, Hasbach, Allgemeine philosophische Grund- 
lagen der von Frangois Quesnay und Adam Smith begriindeten 
politischen Oekonomie. 


Preconceptions: I 87 


to which the natural-rights view is wholesome and ade- 
quate is answerable both for the point of departure and 
for the objective point of the Physiocratic theories, both 
for the range of facts to which they turned and for the 
terms in which they were content to formulate their 
knowledge of the facts which they handled. The failure 
of their critics to place themselves at the Physiocratic 
point of view has led to much destructive criticism of 
their work; whereas, when seen through Physiocratic 
-eyes, such doctrines as those of the net product and of 
the barrenness of the artisan class appear to be substan- 
tially true. 

The speculations of the Physiocrats are commonly ac- 
counted the first articulate and comprehensive presenta- 
tion of economic theory that is in line with later theoretical 
work. The Physiocratic point of view may, therefore, 
well be taken as the point of departure in an attempt to 
trace that shifting of aims and norms of procedure that 
comes into view in the work of later economists when 
compared with earlier writers. 

Physiocratic economics is a theory of the working-out 
of the Law of Nature (Joi naturelle) in its economic bear- 
ing, and this Law of Nature is a very simple matter. 


Les lois naturelles sont ou physiques ou morales. 

On entend ici, par loi physique, le cours réglé de tout événe- 
ment physique de lordre naturel, évidemment le plus avantageux 
au genre humain, 

On entend ici, par loi morale, la régle de toute action humaine 
de Vordre morale, conforme a4 l’ordre physique évidemment le 
plus avantageux au genre humain. 

Ces lois forment ensemble ce qu’on appelle la loi naturelle. 
Tous les hommes et toutes les puissances humaines doivent 
étre soumis A ces lois souveraines, instituées par l’Etre-Supréme: 
elles sont immuables et irréfragables, et les meilleures lois pos- 
sible.5 


5 Quesnay, Droit Naturel, ch. v. (Ed. Daire, Physiocrates, pp. 
52-53). 


88 Preconceptions: I 


The settled course of material facts tending beneficently 
to the highest welfare of the human race,— this is the final 
term in the Physiocratic speculations. This is the touch- 
stone of substantiality. Conformity to these “ immutable 
and unerring” laws of nature is the test of economic 
truth. The laws are immutable and unerring, but that 
does not mean that they rule the course of events with a 


blind fatality that admits of no exception and no diver- — 


gence from the direct line. Human nature may, through 
infirmity or perversity, willfully break over the beneficent 
trend of the laws of nature; but to the Physiocrat’s sense 
of the matter the laws are none the less immutable and 
irrefragable on that account. They are not empirical 
generalisations on the course of phenomena, like the law 
of falling bodies or of the angle of reflection; although 
many of the details of their action are to be determined 
only by observation and experience, helped out, of course, 
by interpretation of the facts of observation under the 
light of reason. So, for instance, Turgot, in his Réflec- 
tions, empirically works out a doctrine of the reasonable 
course of development through which wealth is accumu- 
lated and reaches the existing state of unequal distribu- 
tion; so also his doctrines of interest and of money. The 
immutable natural laws are rather of the nature of canons 
of conduct governing nature than generalisations of me- 
chanical sequence, although in a general way the phe- 
nomena of mechanical sequence are details of the conduct 
\, of nature working according to these canons of conduct. 
’ The great law of the order of nature is of the character 
of a propensity working to an end, to the accomplishment 
of a purpose. The processes of nature working under 
the quasi-spiritual stress of this immanent propensity may 
be characterised as nature’s habits of life. Not that na- 
ture is conscious of its travail, and knows and desires the 


ee eS 


Preconceptions: I 89 


worthy end of its endeavors; but for all that there is a 
quasi-spiritual nexus between antecedent and consequent 
in the scheme of operation in which nature is engaged. 
Nature is not uneasy about interruptions of its course or 
occasional deflections from the direct line through an 
untoward conjunction of mechanical causes, nor does the 
validity of the great overruling law suffer through such 
an episode. The introduction of a mere mechanically 
effective causal factor cannot thwart the course of Nature 
from reaching the goal to which she animistically tends. 
Nothing can thwart this teleological propensity of nature 
except counter-activity or divergent activity of a similarly 
teleological kind. Men can break over the law, and have 
short-sightedly and willfully done so; for men are also 
agents who guide their actions by an end to be achieved. 
Human conduct is activity of the same kind—on the 
same plane of spiritual reality or competency —as the 
course of Nature, and it may therefore traverse the latter. 
The remedy for this short-sighted traffic of misguided hu- 
man nature is enlightenment,—“ instruction publique et 
privée des lois de l’ordre naturel.” ° 

The nature in terms of which all knowledge of phe- 
nomena — for the present purpose economic phenomena 
— is to be finally synthesised is, therefore, substantially of 
a quasi-spiritual or animistic character. The laws of na- 
ture are in the last resort teleological: they are of the 
nature of a propensity. The substantial fact in all the 
sequences of nature is the end to which the sequence natu- 
rally tends, not the brute fact of mechanical compulsion or 
causally effective forces. Economic theory is accordingly 
the theory (1) of how the efficient causes of the ordre 
naturel work in an orderly unfolding sequence, guided 


®Quesnay, Droit Naturel, ch. vy (Ed. Daire, “Physiocrates, p. 
53). 


go Preconceptions: I 


by the underlying natural laws—the propensity imma-— 
nent in nature to establish the highest well-being of man- 
kind, and (2) of the conditions imposed upon human con- 
duct by these natural laws in order to reach the ordained 
goal of supreme human welfare. The conditions so im-— 
posed on human conduct are as definitive as the laws and 
the order by force of which they are imposed; and the © 
theoretical conclusions reached, when these laws and this 
order are known, are therefore expressions of absolute 
economic truth. Such conclusions are an expression of — 
reality, but not necessarily of fact. | 
Now, the objective end of this propensity that deter- 
mines the course of nature is human well-being. But eco- : 
nomic speculation has to do with the workings of nature © 
only so far as regards the ordre physique. And the laws — 
of nature in the ordre physique, working through mechan- — 
ical sequence, can only work out the physical well-being 
of man, not necessarily the spiritual. This propensity to — 
the physical well-being of man is therefore the law of 
nature to which economic science must bring its general- . 
jisations, and this law of physical beneficence is the sub- . 
stantial ground of economic truth. Wanting this, all our — 
speculations are vain; but having its authentication they — 
are definitive. The great, typical function, to which all 
: 


the other functioning of nature is incidental if not sub- — 
sidiary, is accordingly that of the alimentation, nutrition — 
of mankind. In so far, and only in so far as the physical — 
processes contribute to human sustenance and fullness of 

life, can they, therefore, further the great work of nature. 
Whatever processes contribute to human sustenance by — 
adding to the material available for human assimilation | 
and nutrition, by increasing the substance disposable for 
human comfort, therefore count towards the substantial — 
end. All other processes, however serviceable in other 


Preconceptions: I QI 


than this physiological respect, lack the substance of eco- 
nomic: “reality. Accordingly, human industry is produc- 
tive, economically speaking, if it heightens the effective- 
ness of the natural processes out of which the material of 
human sustenance emerges; otherwise not. The test of 
productivity, of economic reality in material facts, is the 
increase of nutritive material. Whatever employment of 
time or effort does not afford an increase of such material 
is unproductive, however profitable it may be to the per- 
son employed, and however useful or indispensable it may 
be to the community. The type of such productive indus- 
try is the husbandman’s employment, which yields a sub- 
stantial (nutritive) gain. The artisan’s work may be 
useful to the community and profitable to himself, but its 
economic effect does not extend beyond an alteration of 
the form in which the material afforded by nature already 
lies at hand. It is formally productive only, not really 
productive. It bears no part in the creative or generative 
work of nature; and therefore it lacks the character of 
economic substantiality. It does not enhance nature’s 
output of vital force. The artisan’s labors, therefore, 
yield no net product, whereas the husbandman’s labors do. 
Whatever constitutes a material increment of this out- 
put of vital force is wealth, and nothing else is. The 
theory of value contained in this position has not to do 
with value according to men’s appraisement of the valu- 
able article. Given items of wealth may have assigned to 
them certain relative values at which they exchange, and 
these conventional values may differ more or less widely 
from the natural or intrinsic value of the goods in ques- , 
tion; but all that is beside the substantial point. The’ 
point in question is not the degree of predilection shown 
by certain individuals or bodies of men for certain goods. 
That is a matter of caprice and convention, and it does not 


92 Preconceptions: I 


directly touch the substantial ground of the economic life. 
The question of value is a question of-the extent to which 
the given item of wealth forwards the end of nature’s 
unfolding process. It is valuable, intrinsically and really, 
in so far as it avails the great work which nature has in 
hand. 

Nature, then, is the final term in the Physiocratic specu- 
lations. Nature works by impulse and in an unfolding 
process, under the stress of a propensity to the accom-— 
plishment of a given end. This propensity, taken as the 
final cause that is operative in any situation, furnishes the 
basis on which to coordinate all our knowledge of those 
efficient causes through which Nature works to her ends. 
For the purpose of economic theory proper, this is the 
ultimate ground of reality to which our quest of economic 
truth must penetrate. But back of Nature and her works © 
there is, in the Physiocratic scheme of the universe, the 
Creator, by whose all-wise and benevolent power the order 
of nature has been established in all the strength and 
beauty of its inviolate and immutable perfection. But 
the Physiocratic conception of the Creator is essentially a 
deistic one: he stands apart from the course of nature 
which he has established, and keeps his hands off. In the - 
last resort, of course, “ Dieu seul est producteur. Les © 
hommes travaillent, receuillent, économisent, conservent; 
mais économiser n’est pas produire.’* But this last 
resort does not bring the Creator into economic theory as — 
a fact to be counted with in formulating economic laws. 
He serves a homiletical purpose in the Physiocratic 
speculations rather than fills an office essential to the 
theory. He comes within the purview of the theory by 
way of authentication rather than as a subject of inquiry — 


7Dupont de Nemours, Correspondance avec J.-B. Say (Ed. 
Daire, Physiocrates, premiére partie, p. 399). 


Preconceptions: I 93 


or a term in the formulation of economic knowledge. 
The Physiocratic God can scarcely be said to be an 
economic fact, but it is otherwise with that Nature whose 
ways and means constitute the subject-matter of the 
Physiocratic inquiry. 

When this natural system of the Physiocratic specula- 
tion is looked at from the side of the psychology of the 
investigators, or from that of the logical premises em- 
ployed, it is immediately recognised as essentially animis- 
tic. It runs consistently on animistic ground; but it is _ 
animism of a high grade,— highly integrated and enlight- 
ened, but, after all, retaining very much of that primitive 
force and naiveté which characterise the animistic expla- 
nations of phenomena in vogue among the untroubled 
barbarians. It is not the disjected animism of the vulgar, 
who see a willful propensity — often a willful perver- 
sity —in given objects or situations to work towards a 
given outcome, good or bad. It is not the gambler’s hap- 
hazard sense of fortuitous necessity or the housewife’s 

belief in lucky days, numbers or phases of the moon. The 
_ Physiocrat’s animism rests on a broader outlook, and does 
not proceed by such an immediately impulsive imputation 
of propensity. The teleological element — the element of 
propensity — is conceived in a large way, unified and har- 
monised, as a comprehensive order of nature as a whole. 
But it vindicates its standing as a true animism by never 
becoming fatalistic and never being confused or con- 
founded with the sequence of cause and effect. It has 
reached the last stage of integration and definition, be- 
yond which the way lies downward from the high, quasi- 
spiritual ground of animism to the tamer levels of nor- 
mality and causal uniformities. 

There is already discernible a tone of dispassionate and 
colorless “tendency” about the Physiocratic animism, 


94. Preconceptions: I 


such as to suggest a wavering towards the side of normal-— 
ity. This is especially visible in such ‘writers as the half-— 
protestant Turgot. In his discussion of the development 
of farming, for instance, Turgot speaks almost entirely 
of human motives and the material conditions under 
which the growth takes place. There is little metaphysics 
in it, and that little does not express the law of nature in 
‘an adequate form. ° But, after all has been said, it remains 
true that the Physiocrat’s sense of substantiality is not 
satisfied until he reaches the animistic ground; and it 
remains true also that the arguments of their opponents — 
made little impression on the Physiocrats so long as they 
were directed to other than this animistic ground of their 
doctrine. This is true in great measure even of Turgot, 
as witness his controversy with Hume. Whatever criti- 
cism is directed against them on other grounds is met with 
impatience, as being inconsequential, if not disingenuous.® 
To an historian of economic theory the source and the 
line of derivation whereby this precise form of the order- 
of-nature preconception reached the Physiocrats are of 
first-rate importance; but it is scarcely a question to be 
taken up here,— in part because it is too large a question 
to be handled here, in part because it has met with ade- 
quate treatment at more competent hands,® and in part 
because it is somewhat beside the immediate point under 
discussion. This point is the logical, or perhaps better the 
psychological, value of the Physiocrats’ preconception, as 
a factor in shaping their point of view and the terms of 
their definitive formulation of economic knowledge. For 
this purpose it may be sufficient to point out that the pre- 


8 See, for instance, the concluding chapters of La Riviére’s 
Ordre Naturel des Sociétés Politiques. 

9E.g., Hasbach, loc. cit.; Bonar, Philosophy and Political 
Economy, Book II; Ritchie, Natural Rights. 


Preconceptions: I 95 


conception in question belongs to the generation in which 
the Physiocrats lived, and that it is the guiding norm of 
all serious thought that found ready assimilation into the 
common-sense views of that time. It is the characteristic 
and controlling feature of what may be called the com- 
mon-sense metaphysics of the eighteenth century, espe- 
cially so far as concerns the enlightened French com- 
munity. 

It is to be noted as a point bearing more immediately 
on the question in hand that this imputation of final causes 
to the course of phenomena expresses a spiritual attitude 
which has prevailed, one might almost say, always and 
everywhere, but which reached its finest, most effective 
development, and found its most finished expression, in 
the eighteenth-century metaphysics. It is nothing recon- 
- dite; for it meets us at every turn, as a matter of course, 
in the vulgar thinking of to-day,—in the pulpit and in 
the market place,— although it is not so ingenuous, nor 
does it so unquestionedly hold the primacy in the thinking 
of any class to-day as it once did. It meets us likewise, 
with but little change of features, at all past stages of cul- 
ture, late or early. Indeed, it is the most generic feature 
of human thinking, so far as regards a theoretical or 
speculative formulation of knowledge. Accordingly, it 
seems scarcely necessary to trace the lineage of this char- 
acteristic preconception of the era of enlightenment, 
through specific channels, back to the ancient philosophers 
or jurists of the empire. Some of the specific forms of 
its expression — as, for instance, the doctrine of Natural 
Rights — are no doubt traceable through medizval chan- 
nels to the teachings of the ancients; but there is no need 
of going over the brook for water, and tracing back to 
specific teachings the main features of that habit of mind 
or spiritual attitude of which the doctrines of Natural 


96 Preconceptions: I 


Rights and the Order of Nature are specific elaborations 
| only. This dominant habit of mind came to the genera- 
' tion of the Physiocrats on the broad ground of group 
| inheritance, not by lineal devolution from any one of the 
\ great thinkers of past ages who had thrown its deliver- 
\ances into a similarly competent form for the use of his 
\own generation. 


In leaving the Physiocratic discipline and the immediate 
sphere of Physiocratic influence for British ground, we 
are met by the figure of Hume. Here, also, it will be 
impracticable to go into details as to the remoter line of 
derivation of the specific point of view that we come upon 
on making the transition, for reasons similar to those al- 
ready given as excuse for passing over the similar ques- 
tion with regard to the Physiocratic point of view. Hume 
is, of course, not primarily an economist; but that placid 
unbeliever is none the less a large item in any inventory of 
eighteenth-century economic thought. Hume was not 
gifted with a facile acceptance of the group inheritance 
that made the habit of mind of his generation. Indeed, 
he was gifted with an alert, though somewhat histrionic, 
skepticism touching everything that was well received. 
It is his office to prove all things, though not necessarily 
to hold fast that which is good. 

Aside from the strain of affectation discernible in 
Hume’s skepticism, he may be taken as an accentuated 
expression of that characteristic bent which distinguishes 
British thinking in his time from the thinking of the Con- 
tinent, and more particularly of the French. There is in 
Hume, and in the British community, an insistence on the 
prosy, not to say the seamy, side of human affairs. He is 
not content with formulating his knowledge of things in 
terms of what ought to be or in terms of the objective 


Preconceptions: I 97 


point of the course of things. He is not even content 
with adding to the teleological account of phenomena a 
chain of empirical, narrative generalisations as to the 
usual course of things. He insists, in season and out of 
season, on an exhibition of the efficient causes engaged in 
any sequence of phenomena; and he is skeptical — irrev- 
erently skeptical — as to the need or the use of any formu- 
lation of knowledge that outruns the reach of his own 
matter-of-fact, step-by-step argument from cause to 
effect. 

In short, he is too modern to be wholly intelligible to 
those of his contemporaries who are most neatly abreast 
of their time. He out-Britishes the British; and, in his 
footsore quest for a perfectly tame explanation of things, 
he finds little comfort, and indeed scant courtesy, at the 
hands of his own generation. He is not in sufficiently 
naive accord with the range of preconceptions then in 
vogue. 

But, while Hume may be an accentuated expression of 
a national characteristic, he is not therefore an untrue 
expression of this phase of British eighteenth-century 
thinking. The peculiarity of point of view and of method 
for which he stands has sometimes been called the critical 
attitude, sometimes the inductive method, sometimes the 
materialistic or mechanical, and again, though less aptly, 
the historical method. Its characteristic is an insistence 
onmatteroffact. = 

This matter-of-fact animus that meets any historian of 
economic doctrine on his introduction to British econom- 
ics is a large, but not the largest, feature of the British 
scheme of early economic thought. It strikes the atten- 
tion because it stands in contrast with the relative ab- 
sence of this feature in the contemporary speculations of 
the Continent. The most potent, most formative habit of 


\ 


98 Preconceptions: I 


thought concerned in the early development of economic 
teaching on British ground is best seen in the broader 
generalisations of Adam Smith, and this more potent 
factor in Smith is a bent that is substantially identical 
with that which gives consistency to the speculations of 
the Physiocrats. In.Adam-—Smith the two are happily 
combined, not to say blended; but the animistic habit still 
holds the primacy, with the matter-of-fact as a subsidiary 
though powerful factor. He is said to have combined 
deduction with induction. The relatively great promi- 
nence given the latter marks the line of divergence of 
British from French economics, not the line of coinci- 
dence; and on this account it may not be out of place to 
look more narrowly into the circumstances to which the 
emergence of this relatively greater penchant for a matter- 
of-fact explanation of things in the British community is 
due. 

To explain the characteristic animus for which Hume 
stands, on grounds that might appeal to Hume, we should 
have to inquire into the peculiar circumstances — ulti- 
mately material circumstances — that have gone to shape 
the habitual view of things within the British community, 
and that so have acted to differentiate the British precon- 
ceptions from the French, or from the general range of 
preconceptions prevalent on the Continent. These pecul- 
iar formative circumstances are no doubt to some extent 
racial peculiarities ; but the racial complexion of the Brit- 
ish community is not widely different from the French, 
and especially not widely different from certain other 
Continental communities which are for the present pur- 
pose roughly classed with the French. Race difference 
can therefore not wholly, nor indeed for the greater part, 
account for the cultural difference of which this differ- 
ence in preconceptions is an outcome. Through its cumu- 


Preconceptions: I 99 


lative effect on institutions the race difference must be 
held to have had a considerable effect on the habit of 
mind of the community; but, if the race difference is in 
this way taken as the remoter ground of an ate 
peculiarity, which in its turn has shaped prevalent habits | 
of thought, then the attention may be directed to the 
proximate causes, the concrete circumstances, through 
which this race difference has acted, in conjunction with 
other ulterior circumstances, to work out the psychologi- 
cal phenomena observed. Race differences, it may be re- ( 
marked, do not so nearly coincide with national lines of 
demarcation as differences in the point of view from 
which things are habitually apprehended or differences in 
the standards according to which facts are rated. 

If the element of race difference be not allowed defini- 
tive weight in discussing national peculiarities that under- 
lie the deliverances of common sense, neither can these 
national peculiarities be confidently traced to a national 
difference in the transmitted learning that enters into the 
common-sense view of things. So far as concerns the 
concrete facts embodied in the learning of the various _ 
nations within the European culture, these nations make 
up but a single community. What divergence is visible 
does not touch the character of the positive information 
with which the learning of the various nations is occupied. 
Divergence is visible in the higher syntheses, the methods 
of handling the material of knowledge, the basis of valua- 
tion of the facts taken up, rather than in the material of 
knowledge. But this divergence must be set down to a 
cultural difference, a difference of point of view, not to a 
difference in inherited information. When a given body 
of information passes the national frontiers it acquires a 
new complexion, a new national, cultural physiognomy. 
It is this cultural physiognomy of learning that is here 


100 Preconceptions: I 


under inquiry, and a comparison of early French econom- 
ics (the Physiocrats) with early British economics (Adam 
Smith) is here entered upon merely with a view to making 
out what significance this cultural physiognomy of the 
‘science has for the past progress of economic speculation. 
_ The broad features of economic speculation, as it stood 
at the period under consideration, may be briefly summed 
up, disregarding the element of policy, or expediency, 
which is common to both groups of economists, and at- 
tending to their theoretical work alone. With the Physi- 
ocrats, as with Adam Smith, there are two main points of 
view from which economic phenomena are treated: (a) 


‘ 


the matter-of-fact point of view or preconception, which — 


yields a discussion of causal sequences and ‘correlations ; 
and (b) what, for want of a more expressive word, is here 
called the animistic point of view or preconception, which, 
yields a discussion of teleological sequences and corr TET 
tions,— a discussion of the function of this and that 
“organ,” of the legitimacy of this or the other range of 
facts. The former preconception is allowed a larger 
scope in the British than in the French economics: there 
is more of “induction” in the British. The latter pre- 
conception is present in both, and is the definitive element 
in both; but the animistic element is more colorless in the 
British, it is less constantly in evidence, and less able to 
_ stand alone without the support of arguments from cause 
to effect. Still, the animistic element is the controlling 
factor in the higher syntheses of both; and for both alike 
it affords the definitive ground on which the argument 
finally comes to rest. In neither group of thinkers is the 
sense of substantiality appeased until this quasi-spiritual 
ground, given by the natural propensity of the course of 
events, is reached. But the propensity in events, the nat- 
ural or normal course of things, as appealed to by the 


Preconceptions: I IOI 


British speculators, suggests less of an imputation of will- 
power, or personal force, to the propensity in question. 
It may be added, as has already been said in another 
place, that the tacit imputation of will-power or spiritual 
consistency to the natural or normal course of events has 
progressively weakened in the later course of economic 
speculation, so that in this respect, the British economists 
of the eighteenth century may be said to represent a later 
phase of economic inquiry than the Physiocrats. 


Unfortunately, but unavoidably, if this question as to 
the cultural shifting of the point of view in economic sci- 
ence is taken up from the side of the causes to which the 
shifting is traceable, it will take the discussion back to 
ground on which an economist must at best feel himself 
to be but a raw layman, with all a layman’s limitations 
and ineptitude, and with the certainty of doing badly what 
might be done well by more competent hands. But, with 
a reliance on charity where charity is most needed, it is 
necessary to recite summarily what seems to be the psy- 
chological bearing of certain cultural facts. 

A cursory acquaintance with any of the more archaic \ 
phases of human culture enforces the recognition of this _ 
fact,— that the habit of construing the phenomena of the 
inanimate world in animistic terms prevails pretty much 
universally on these lower levels. Inanimate phenomena 
are apprehended to work out a propensity to an end; the 
movements of the elements are construed in terms of 
quasi-personal force. So much is well authenticated by 
the observations on which anthropologists and ethnologists 
draw for their materials. This animistic habit, it may be 
said, seems to be more effectual and far-reaching among 
those primitive communities that lead a predatory life. 

But along with this feature of archaic methods of 


102 Preconceptions: I 


thought or of knowledge, the picturesqueness of which 
has drawn the attention of all observers, there goes a sec- 
ond feature, no less important for the purpose in hand, 
though less obtrusive. The latter is of less interest to 
the men who have to do with the theory of cultural devel- 
opment, because it is a matter of course. This second 
feature of archaic thought is the habit of also apprehend- 
\ ing facts in non-animistic, or impersonal, terms. The 
imputation of propensity in no case extends to all the 
rmechanical facts in the case. There is always a sub- 
stratum of matter of fact, which is the outcome of an 
habitual imputation of causal sequence, or, perhaps better, 
_ an imputation of mechanical continuity, if a new term be 
\ permitted. The agent, thing, fact, event, or phenomenon, 
to which propensity, will-power, or purpose, is imputed, is 
always apprehended to act in an environment which is 
accepted as spiritually inert. There are always opaque 
facts as well as self-directing agents. Any agent acts 
through means which lend themselves to his use on other 
grounds than that of spiritual compulsion, although spir- 
itual compulsion may be a large feature in any given case. 

The same features of human thinking, the same two 
complementary methods of correlating facts and handling 
them for the purposes of knowledge, are similarly in con- 
stant evidence in the daily life of men in our own com- 
munity. The question is, in great part, which of the two 
bears the greater part in shaping human knowledge at any 
given time and within any given range of knowledge or 
of facts. 

Other features of the growth of knowledge, which are 
remoter from the point under inquiry, may be of no less 
consequence to a comprehensive theory of the develop- 
ment of culture and of thought; but it is of course out of 
the question here to go farther afield. The present in- 


Preconceptions: I 103 


quiry will have enough to do with these two. No other 
features are correlative with these, and these merit dis- 
cussion on account of their intimate bearing on the point 
of view of economics. The point of interest with respect 
to these two correlative and complementary habits of 
thought is the question of how they have fared under the 
changing exigencies of human culture; in what manner 
they come, under given cultural circumstances, to share 
the field of knowledge between them; what is the relative 
part of each in the composite point of view in which the 
two habits of thought express themselves at any given 
cultural stage. 

The animistic preconception enforces the apprehension ° 
of phenomena in terms generically identical with the terms 
of personality or individuality. As a certain modern 
group of psychologists would say, it imputes to objects 
and sequences an element of habit and attention similar 
in kind, though not necessarily in degree, to the like spirit- 
ual attitude present in the activities of a personal agent. 
The matter-of-fact preconception, on the other hand, en- 
forces a handling of facts without imputation of personal 
force or attention, but with an imputation of mechanical 
continuity, substantially the preconception which has 
reached a formulation at the hands of scientists under the 
name of conservation of energy or persistence of quantity. 
Some appreciable resort to the latter method of knowl- 
edge is unavoidable at any cultural stage, for it is indis- 
pensable to all industrial efficiency. All technological 
processes and all mechanical contrivances rest, psycho- 
logically speaking, on this ground. This habit of thought 
is a selectively necessary consequence of industrial life, 
and, indeed, of all human experience in making use of the 
material means of life. It should therefore follow that, in 
a general way, the higher the culture, the greater the share 


104 Preconceptions: I 


of the mechanical preconception in shaping human 


thought and knowledge, since, in a general way, the stage — 


of culture attained depends on the efficiency of industry, — 


The rule, while it does not hold with anything like ex- 


treme generality, must be admitted to hold to a good ex- — 
tent; and to that extent it should hold also that, by a ~ 


selective adaptation of men’s habits of thought to the 
exigencies of those cultural phases that have actually 
supervened, the mechanical method of knowledge should 
have gained in scope and range. Something of the sort 
is borne out by observation. 

A further consideration enforces the like view. As the 
community increases in size, the range of observation of 
the individuals in the community also increases; and con- 
tinually wider and more far-reaching sequences of a me- 


_—- 


chanical kind have to be taken account of. Men have to — 
adapt their own motives to industrial processes that are 
not safely to be construed in terms of propensity, predi- 


lection, or passion. Life in an advanced industrial com- 
munity does not tolerate a neglect of mechanical fact; for 


the mechanical sequences through which men, at an appre- — 


ciable degree of culture, work out their livelihood, are no 
respecters of persons or of will-power. Still, on all but 
the higher industrial stages, the coercive discipline of in- 
dustrial life, and of the scheme of life that inculcates re- 
gard for the mechanical facts of industry, is greatly miti- 


gated by the largely haphazard character of industry, and | 


by the great extent to which man continues to be the prime 
mover in industry. So long as industrial efficiency is 
chiefly a matter of the handicraftsman’s skill, dexterity, 
and diligence, the attention of men in looking to the indus- 
trial process is met by the figure of the workman, as the 
chief and characteristic factor; and thereby it comes to 
run on the personal element in industry. 


Preconceptions: I 105 


But, with or without mitigation, the scheme of life 
which men perforce adopt under exigencies of an ad- 
vanced industrial situation shapes their habits of thought 
on the side of their behavior, and thereby shapes their 
habits of thought to some extent for all purposes. Each 
individual is but a single complex of habits of thought, 
and the same psychical mechanism that expresses itself in 
one direction as conduct expresses itself in another direc- 
tion as knowledge. The habits of thought formed in the 
one connection, in response to stimuli that call for a re- 
sponse in terms of conduct, must, therefore, have their 
effect when the same individual comes to respond to stim- 
uli that call for a response in terms of knowledge. The 
scheme of thought or of knowledge is in good part a re- 
verberation of the scheme of life. So that, after all has \ 
been said, it remains true that with the growth of indus- 
trial organization and efficiency there must, by selection 
and by adaptation, supervene a greater resort to the me- 
chanical or dispassionate method of apprehending facts. / 

But the industrial side of life is not the whole of it, nor 
does the scheme of life in vogue in any community or at 
any cultural stage comprise industrial conduct alone. The 
social, civic, military, and religious interests come in for 
their share of attention, and between them they commonly 
take up by far the larger share of it. Especially is this 
true so far as concerns those classes among whom we 
commonly look for a cultivation of knowledge for knowl- 
edge’s sake. The discipline which these several interests 
exert does not commonly coincide with the training given 
by industry. So the religious interest, with its canons of 
truth and of right living, runs exclusively on personal re- 
lations and the adaptation of conduct to the predilections 
of a superior personal agent. The weight of its disci- 
pline, therefore, falls wholly on the animistic side. It 


q 


106 Preconceptions: I 


acts to heighten our appreciation of the spiritual bearing © 
of phenomena and to discountenancé a matter-of-fact — 
apprehension of things. The skeptic of the type of Hume > 


has never been in good repute with those who stand 


closest to the accepted religious truths. The bearing of — 


this side of our culture upon the development of econom- 
ics is shown by what the medizval scholars had to say on 
economic topics. 


The disciplinary effects of other phases of life, outside — 
of the industrial and the religious, is not so simple a mat- — 
ter ; but the discussion here approaches nearer to the point — 
of immediate inquiry,— namely, the cultural situation in — 


the eighteenth century, and its relation to economic specu- 


lation,— and this ground of interest in the question may 
help to relieve the topic of the tedium that of right belongs © 


to it. 

In the remoter past of which we have records, and even 
in the more recent past, Occidental man, as well as man 
elsewhere, has eminently been a respecter of persons. 
Wherever the warlike activity has been a large feature of 


the community’s life, much of human conduct in society — 
has proceeded on a regard for personal force. The © 
scheme of life has been a scheme of personal aggression — 


and subservience, partly in the naive form, partly conven- 
tionalised in a system of status. The discipline of social 
life for the present purpose, in so far as its canons of 
conduct rest on this element of personal force in the un- 
conventionalised form, plainly tends to the formation of a 
habit of apprehending and coordinating facts from the 
animistic point of view. So far as we have to do with 


life under a system of status, the like remains true, but 
with a difference. The régime of status inculcates an un- ~ 


remitting and very nice discrimination and observance of 


distinctions of personal superiority and inferiority. To 


Preconceptions: I 107 


the criterion of personal force, or will-power, taken in its 
immediate bearing on conduct, is added the criterion of 
personal excellence-in-general, regardless of the first-hand 
potency of the given person as an agent. This criterion 
of conduct requires a constant and painstaking imputation 
of personal value, regardless of fact. The discrimination 
enjoined by the canons of status proceeds on an invidious 
comparison of persons in respect of worth, value, potency, 
virtue, which must, for the present purpose, be taken as 
putative. The greater or less personal value assigned a 
given individual or a given class under the canons of 
status is not assigned on the ground of visible effciency, 
but on the ground of a dogmatic allegation accepted on the 
strength of an uncontradicted categorical affirmation sim- 
ply. The canons of status hold their ground by force of 
preemption. Where distinctions of status are based on a 
putative worth transmitted by descent from honorable 
antecedents, the sequence of transmission to which appeal 
is taken as the arbiter of honor is of a putative and ani- 
mistic character rather than a visible mechanical continu- 
ity. The habit of accepting as final what is prescriptively 
right in the affairs of life has as its reflex in the affairs 
of knowledge the formula, Quid ab omnibus, quid ubique 
creditur credendum est. 

Even this meager account of the scheme of life that 
characterises a régime of status should serve to indicate 
what is its disciplinary effect in shaping habits of thought, 
and therefore in shaping the habitual criteria of knowl- 
edge and of reality. A culture whose institutions are a 
framework of invidious comparisons implies, or rather 
involves and comprises, a scheme of knowledge whose 
definitive standards of truth and substantiality are of an 
animistic character ; and, the more undividedly the canons 
of status and ceremonial honor govern the conduct of the 


108 Preconceptions: I 


community, the greater the facility with which the se- 
quence of cause and effect is made to yield before the 
higher claims of a spiritual sequence or guidance in the 
course of events. Men consistently trained to an unre- 
mitting discrimination of honor, worth, and personal force 
in their daily conduct, and to whom these criteria afford 
the definitive ground of sufficiency in coordinating facts 
for the purposes of life, will not be satisfied to fall short 
of the like definitive ground of sufficiency when they come 
to coordinate facts for the purposes of knowledge simply. 
The habits formed in unfolding his activity in one direc- 
tion, under the impulse of a given interest, assert them- 
selves when the individual comes to unfold his activity in 
any other direction, under the impulse of any other inter- 
est. If his last resort and highest criterion of truth in 
conduct is afforded by the element of personal force and 
invidious comparison, his sense of substantiality or truth 
in the quest of knowledge will be satisfied only when a like 
definitive ground of animistic force and invidious com- 
parison is reached. But when such ground is reached he 
rests content and pushes the inquiry no farther. In his 
practical life he has acquired the habit of resting his case 
on an authentic deliverance as to what is absolutely right. 
This absolutely right and good final term in conduct has 
the character of finality only when conduct is construed 
in a ceremonial sense; that is to say, only when life is 
conceived as a scheme of conformity to a purpose outside 


| and beyond the process of living. Under the régime of 


status this ceremonial finality is found in the concept of 
worth or honor. In the religious domain it is the concept 
of virtue, sanctity, or tabu. Merit lies in what one is, 
not in what one does. The habit of appeal to ceremonial 
finality, formed in the school of status, goes with the indi- 
vidual in his quest of knowledge, as a dependence upon a 


ES  — 


oe 


Preconceptions: I 109 


similarly authentic norm of absolute truth_—a similar 
seeking of a final term outside and beyond the range of 
knowledge. 

The discipline of social and civic life under a régime of 
status, then, reénforces the discipline of the religious life; 
and the outcome of the resulting habituation is that the 
canons of knowledge are cast in the animistic mold and 
converge to a ground of absolute truth, and this absolute 
truth is of a ceremonial nature. Its subject-matter is a 
reality regardless of fact. 

The outcome, for science, of the religious and social life 
of the civilisation of status, in Occidental culture, was a 
structure of quasi-spiritual appreciations and explana- 
tions, of which astrology, alchemy, and medieval theology 
and metaphysics are competent, though somewhat one- 
sided, exponents. Throughout the range of this early \ 
learning the ground of correlation of phenomena is in part \ 
the supposed relative potency of the facts correlated; but | 
it is also in part a scheme of status, in which facts are | 
scheduled according to a hierarchical gradation of worth / 
or merit, having only a ceremonial relation to the observed / 
phenomena. Some elements (some metals, for instance) 
are noble, others base; some planets, on grounds of cere- 
monial efficacy, have a sinister influence, others a benefi- 
cent one; and it is a matter of serious consequence 
whether they are in the ascendant, and so on. 

The body of learning through which the discipline of 
animism and invidious comparison transmitted its effects 
to the science of economics was what is known as natural _ 
theology, natural rights, moral philosophy, and natural 
law. These several disciplines or bodies of knowledge | 
had wandered far from the naive animistic standpoint at | 
the time when economic science emerged, and much the 
same is true as regards the time of the emergence of other | 


110 Preconceptions: I 


modern sciences. But the discipline which makes for an 
animistic formulation of knowledge continued to hold the 
primacy in modern culture, although its dominion was 
never altogether undivided or unmitigated. Occidental 
culture has long been largely an industrial culture; and, 
as already pointed out, the discipline of industry, and of 
life in an industrial community, does not favor the animis- 
tic preconception. This is especially true as regards in- 
dustry which makes large use of mechanical contrivances. 
The difference in these respects between Occidental in- 
dustry and science, on the one hand, and the industry and 
science of other cultural regions, on the other hand, is 
worth noting in this connection. The result has been that 
the sciences, as that word is understood in later usage, 
have come forward gradually, and in a certain rough par- 
allelism with the development of industrial processes and 
industrial organisation. It is possible to hold that both 
modern industry (of the mechanical sort) and modern 
science center about the region of the North Sea. It is 
still more palpably true that within this general area the 
sciences, in the recent past, show a family likeness to the 
civil and social institutions of the communities in which 


they have been cultivated, this being true to the greatest 


extent of the higher or speculative sciences; that is, in 
that range of knowledge in which the animistic precon- 
ception can chiefly and most effectively find application. 
There is, for instance, in the eighteenth century a per- 
ceptible parallelism between the divergent character of 
British and Continental culture and institutions, on the 
one hand, and the dissimilar aims of British and Conti- 
nental speculation, on the other hand. 

Something has already been said of the difference in 
preconceptions between the French and the British econ- 
omists of the eighteenth century. It remains to point out 


| 
. 
: 


Preconceptions: I III 


the correlative cultural difference between the two com- 
munities, to which it is conceived that the difference in 
scientific animus is in great measure due. It is, of course, 
only the general features, the general attitude of the spec- 
ulators, that can be credited to the difference in culture. 
Differences of detail in the specific doctrines held could 
be explained only on a much more detailed analysis than 
can be entered on here, and after taking account of facts 
which cannot here be even allowed for in detail. 

Aside from the greater resort to mechanical contriv- 
ances and the larger scale of organisation in British indus- 
try, the further cultural peculiarities of the British com- 
munity run in the same general direction. British re- 
Jigious_life and beliefs had less of the element of fealty — 
personal or discretionary mastery and subservience — and 
more of a tone of fatalism. The civil institutions of the 
British had not the same rich personal content as those 
of the French. The British subject owned allegiance to 
an impersonal law rather than to the person of a supe- 
rior. Relatively, it may be said that the sense of status, as 
a coercive factor, was in abeyance in the British commu- 
nity. Even in the warlike enterprise of the British com- / 
munity a similar characteristic is traceable. Warfare is, 
of course, a matter of personal assertion. Warlike com- 
munities and classes are necessarily given to construing 
facts in terms of personal force and personal ends. They 
are always superstitious. They are great sticklers for 
rank and precedent, and zealously cultivate those distinc- 
tions and ceremonial observances in which a system of 
status expresses itself. But, while warlike enterprise has 
by no means been absent from the British scheme of life, 
the geographical and strategic isolation of the British com- 
munity has given a characteristic turn to their military 
relations. In recent times British warlike operations have 


II2 Preconceptions: I 


been conducted abroad. The military class has conse- 
quently in great measure been segregated out from the 
body of the community, and the ideals and prejudices of 
the class have not been transfused through the general 
body with the same facility and effect that they might 
otherwise have had. The British community at home has 
seen the campaign in great part from the standpoint of 
the “ sinews of war.” 

The outcome of all these national peculiarities of cir- 
cumstance and culture has been that a different scheme of 
life has been current in the British community from what 
has prevailed on the Continent. There has resulted the 
formation of a different body of habits of thought and a 
different animus in their handling of facts. The precon- 
ception of causal sequence has been allowed larger scope 
in the correlation of facts for purposes of knowledge; and, 
where the animistic preconception has been resorted to, as 
it always has in the profounder reaches of learning, it has 
commonly been an animism of a tamer kind. 

/ Taking Adam Smith as an exponent of this British atti- 


' tude in theoretical knowledge, it is to be noted that, while 


he formulates his knowledge in terms of a propensity 
(natural laws) working teleologically to an end, the end 
or objective point which controls the formulation has not 
the same rich content of vital human interest or advan- 


\ tage as is met with in the Physiocratic speculations. 


There is perceptibly less of an imperious tone in Adam 
Smith’s natural laws than in those of the contemporary 
French economists. It is true, he sums up the institu- 
tions with which he deals in terms of the ends which they 
should subserve, rather than in terms of the exigencies 
and habits of life out of which they have arisen; but he 
does not with the same tone of finality appeal to the end 
subserved as a final cause through whose coercive guid- 


———————ss” 


Preconceptions: I 113 


ance the complex of phenomena is kept to its appointed 
task. Under his hands the restraining, compelling agency 
retires farther into the background, and appeal is taken 
to it neither so directly nor on so slight provocation. 

But Adam Smith is too large a figure to be disposed of 
in a couple of concluding paragraphs. At the same time 
his work and the bent which he gave to economic specu- 
lation are so intimately bound up with the aims and bias 
that characterise economics in its next stage of develop- 
ment that he is best dealt with as the point of departure for 
the Classical School rather than merely as a British coun- 
terpart of Physiocracy. Adam Smith will accordingly be 
considered in immediate connection with the bias of the 
classical school and the incursion of utilitarianism into 
economics. 


THE PRECONCEPTIONS OF ECONOMIC 
SCIENCE® 


II 


Apam SmitTH’s animistic bent asserts itself more plainly 
and more effectually in the general trend and aim of his — 
discussion than in the details of theory. “ Adam Smith’s 
Wealth of Nations is, in fact, so far as it has one single ~ 
purpose, a vindication of the unconscious law present in 
the separate actions of men when these actions are di- 
rected by a certain strong personal motive.” * Both in the 
Theory of the Moral Sentiments and in the Wealth of 
Nations there are many passages that testify to his abiding 
conviction that there is a wholesome trend in the natural 
course of things, and the characteristically optimistic tone — 
in which he speaks for natural liberty is but an expression — 
of this conviction. An extreme resort to this animistic 
ground occurs in his plea for freedom of investment. 


1 Reprinted by permission from The Quarterly Journal of Eco- 
nomics, Vol. XIII, July. 1899. 

2 Bonar, Philosophy and Political Economy, pp. 177, 178. 

3 “Every individual is continually exerting himself to find out 
the most advantageous employment for whatever capital he can 
command. It is his own advantage, and not that of the society, 
which he has in view. But the study of his own advantage 
naturally, or rather necessarily, leads him to prefer that employ- 
ment which is most advantageous to the society. . . . By direct- 
ing that industry in such a manner as its produce may be of the 
greatest value, he intends only his own gain; and he is in this, 
as in many other cases, led by an invisible hand to promote an 
end which was no part of his intention. Nor is it always the 
worse for society that it was no part of it. By pursuing his own 

114 


Sa 


Preconceptions: II 115 


In the proposition that men are “led by an invisible 
hand,” Smith does not fall back on a meddling Providence 
who is to set human affairs straight when they are in 
danger of going askew. He conceives the Creator to be 
very continent in the matter of interference with the nat- | 
ural course of things. The Creator has established the / 
natural order to serve the ends of human welfare; and he 
has very nicely adjusted the efficient causes comprised in 
the natural order, including human aims and motives, to 
this work that they are to accomplish. The guidance of 
the invisible hand takes place not by way of interposition, 
but through a comprehensive scheme of contrivances 
established from the beginning. For the purpose of eco- 
nomic theory, man is conceived to be consistently self- 
seeking; but this economic man is a part of the mechan- 
ism of nature, and his self-seeking traffic is but a means 
whereby, in the natural course of things, the general wel- 
fare is worked out. The scheme as a whole is guided by 
the end to be reached, but the sequence of events through 
which the end is reached is a causal sequence which is 
not broken into episodically. The benevolent work of . 
guidance was performed in first establishing an ingenious 
mechanism of forces and motives capable of accomplish- 
ing an ordained result, and nothing beyond the enduring 
constraint of an established trend remains to enforce the 
divine purpose in the resulting natural course of things. 

The sequence of events, including human motives and 


| human conduct, is a causal sequence; but it is also some- 


thing more, or, rather, there is also another element of 
continuity besides that of brute cause and effect, present 
even in the step-by-step process whereby the natural 
interest he frequently promotes that of the society more effectu- 


ally than when he really intends to promote it.” Wealth of 
Nations, Book IV, chap. ii. 


116 Preconceptions: II 


course of things reaches its final term. The presence of © 
_\such a quasi-spiritual or non-causal element is evident 
\ from two (alleged) facts. (1)- The course of things may 
be deflected from the direct line of approach to that con- 
summate human welfare which is its legitimate end. The 
natural trend of things may be overborne by an untoward 
conjuncture of causes. There is a distinction, often dis-— 
tressingly actual and persistent, between the legitimate 
and the observed course of things. If “natural,” in 
Adam Smith’s use, meant necessary, in the sense of caus- 
ally determined, no divergence of events from the natural — 
or legitimate course of things would be possible. If the © 
mechanism of nature, including man, were a mechani-— 
cally competent contrivance for achieving the great arti- 
ficer’s design, there could be no such episodes of blunder- 
ing and perverse departure from the direct path as Adam 
Smith finds in nearly all existing arrangements. Institu- — 
tional facts would then be “ natural.”* (2) When things 
have gone wrong, they will right themselves if interfer- 
ence with the natural course ceases; whereas, in the case 
of a causal sequence simply, the mere cessation of inter-— 
ference will not leave the outcome the same as if no 
interference had taken place. This recuperative power of 
nature is of an extra-mechanical character. The continu-— 
ity of sequence by force of which the natural course of 
things prevails is, therefore, not of the nature of cause and 
effect, since it bridges intervals and interruptions in the 
causal sequence.- Adam Smith’s use of the term “real” 


4 The discrepancy between the actual, causally determined situ- 
ation and the divinely intended consummation is the metaphysical - 
ground of all that inculcation of morality and enlightened policy 
that makes up so large a part of Adam Smith’s work. The like, 
of course, holds true for all moralists and reformers who pro- 
ceed on the assumption of a providential order. 

5“Tn the political body, however, the wisdom of nature has 


Preconceptions: II 1 


in statements of theory — as, for example, “ real value,” 
“real price” ®—is evidence to this effect. “ Natural” 
commonly has the same meaning as “real” in this con- 
nection.’ Both “natural” and “ real” are placed in con- 
trast with the actual; and, in Adam Smith’s apprehension, 
both have a substantiality different from and superior to 
facts. The view involves a distinction between reality 
and fact, which survives in a weakened form in the 
theories of “normal” prices, wages, profits, costs, in 
Adam Smith’s successors. 

This animistic prepossession seems to pervade the ear- 
lier of his two monumental works in a greater degree 
than the later. In the Moral Sentiments recourse is had 
to the teleological ground of the natural order more freely 
and with perceptibly greater insistence. There seems to 
be reason for holding that the animistic preconception 
weakened or, at any rate, fell more into the background 
as his later work of speculation and investigation pro- 
ceeded. The change shows itself also in some details of 
his economic theory, as first set forth in the Lectures, and 
afterwards more fully developed in the Wealth of Na- 
tions. So, for instance, in the earlier presentation of the 


fortunately made ample provision for remedying many of the bad 
effects of the folly and injustice of man; in the same manner 
as it has done in the natural body, for remedying those of his 
sloth and intemperance.” Wealth of Nations, Book IV, chap. ix. 

6E.g., “the real measure of the exchangeable value of all 
commodities.” Wealth of Nations, Book I, chap. v, and re- 
peatedly in the like connection. 

7 E.g., Book I, chap. vii: “ When the price of any commodity is 
neither more nor less than what is sufficient to pay the rent of the 
land, the wages of the labor, and the profits of the stock employed 
in raising, preparing, and bringing it to market, according to their 
natural rates, the commodity is then sold for what may be called 
its natural price.” “The actual price at which any commodity is 
commonly sold is called its market price. It may be either above 
or below or exactly the same with its natural price.” 


118 Preconceptions: II 


matter, “the division of labor is the immediate cause of 
opulence ”; and this division of labor,. which is the chief 
condition of economic well-being, “flows from a direct 
propensity in human nature for one man to barter with 
lanother.”® The ‘ “propensity” in question is here ap- 
‘pealed to as a natural endowment immediately given to 
“man with a view to the welfare of human society, and 
| without any attempt at further explanation of how man 
| has come by it. No causal explanation of its presence or 
| character is offered. But the corresponding passage of 
the Wealth of Nations handles the question more cau- 
tiously.° Other parallel passages might be compared, with 
much the same effect. The guiding hand has withdrawn 
farther from the range of human vision. 

However, these and other like filial expressions of a 
devout optimism need, perhaps, not be taken as integral 
features of Adam Smith’s economic theory, or as seri- 
ously affecting the character of his work as an economist. 
They are the expression of his general philosophical and 
theological views, and are significant for the present pur- 
pose chiefly as evidences of an animistic and optimistic 
bent. They go to show what is Adam Smith’s accepted 
ground of finality,— the ground to which all his specula- 
tions on human affairs converge; but they do not in any 


8 Lectures of Adam Smith (Ed. Cannan, 1896), p. 160. 

9“ This division of labor, from which so many advantages are 
derived, is not originally the effect of any human wisdom, which 
foresees and intends that general opulence to which it gives occa- 
sion. It is the necessary though very slow and gradual conse- 
quence of a certain propensity in human nature which has in 
view no such extensive utility the propensity to truck, barter, 
and exchange one thing for another. Whether this propensity be 
one of those original principles in human nature of which no 
further account can be given, or whether, as seems more 
probable, it be the necessary consequence of the faculties of 
reason and speech, it belongs not to our present subject to in- 
quire.’ Wealth of Nations, Book I, chap. ii. 


Preconceptions: II Be) 


great degree show the teleological bias guiding his formu- 
lation of economic theory in detail. 

The effective working of the teleological bias is best 
seen in Smith’s more detailed handling of economic phe- 
nomena — in his discussion of what may loosely be called 
economic institutions — and in the criteria and principles 
of procedure by which he is guided in incorporating these 
features of economic life into the general structure of his 
theory. A fair instance, though perhaps not the most 
telling one, is the discussion of the “real and nominal 
price,” and of the “natural and market price” of com- 
modities, already referred to above.*° The “real” price 
of commodities is their value in terms of human life. 
At this point Smith differs from the Physiocrats, with 
whom the ultimate terms of value are afforded by human 
sustenance taken as a product of the functioning of brute 
mature ; the cause of the difference being that the Physio- 
crats conceived the natural order which works towards 
the material well-being of man to comprise the non- 
human environment only, whereas Adam Smith includes 
man in-this_concept of the natural order, and, indeed, 
makes him the central figure in the process of production. 
With the Physiocrats, production is the work of nature: 
with Adam Smith, it is the work of man and nature, with 
man in the foreground. In Adam Smith, therefore, labor ~ 
is the final term in valuation. This “ real ” value of com- 
modities is the value imputed to them by the economist 
under the stress of his teleological preconception. It has 
little, if any, place in the course of economic events, and 
no bearing on human affairs, apart from the sentimental 
influence which such a preconception in favor of a “ real 
value” in things may exert upon men’s notions of what 
is the good and equitable course to pursue in their trans- 


10 Wealth of Nations, Book I, chaps. v.—vii. 


120 Preconceptions: II 


actions. It is impossible to gauge this real value of 
goods; it cannot be measured or expressed in concrete 
terms. Still, if labor exchanges for a varying quantity of 
goods, “it is their value which varies, not that of the 
labor which purchases them.” "7 The values which prac- 
tically attach to goods in men’s handling of them are con- 
ceived to be determined without regard to the real value 
which Adam Smith imputes to the goods; but, for all that, 
the substantial fact with respect to these market values is 
their presumed approximation to the real values teleologi- 
cally imputed to the goods under the guidance of inviolate 
natural laws. The real, or natural, value of articles has 
no causal relation to the value at which they exchange. 
The discussion of how values are determined in practice 
runs on the motives of the buyers and sellers, and the rela- 
tive advantage enjoyed by the parties to the transaction.” 
It is a discussion of a process of valuation, quite unre- 
lated to the “real,” or “natural,” price of things, and 
quite unrelated to the grounds on which things are held 
to come by their real, or natural, price; and yet, when the : 
complex process of valuation has been traced out in terms” 
of human motives and the exigencies of the market, Adam 
Smith feels that he has only cleared the ground. He 
then turns to the serious business of accounting for value 
and price theoretically, and making the ascertained facts” 
articulate with his teleological theory of economic life.** 


11 Wealth of Nations, Book I, chap. v. i 
12 As, e.g., the entire disenseren of the determination of Wages, 
Profits ‘and Rent, in Book I, chaps. viii—xi. t 
13 “ There is in every society or neighborhood an ordinary or 
average rate both of wages and profit in every different employ-— 
ment of labor and stock This rate is naturally regulated, ... 
partly by the general circumstances of the society. . . . There is, 
likewise, in every society or neighborhood an ordinary or average 
rate of rent, which is regulated, too. ... These ordinary 0 
average rates may be called the natural rates of wages, profit, 


4 
2 


| 


Preconceptions: II 121 


é bs 


The occurrence of the words “ordinary” and “ aver- 
age” in this connection need not be taken too seriously. 
The context makes it plain that the equality which com- 
monly subsists between the ordinary or average rates, and 
the natural rates, is a matter of coincidence, not of iden- 
tity. Not only are there temporary deviations, but there 
may be a permanent divergence between the ordinary and 
the natural price of a commodity; as in case of a monop- 
oly or of produce grown under peculiar circumstances of 
soil or climate.1* 

The natural price coincides with the price fixed by com- 
petition, because competition means the unimpeded play 
of those efficient forces through which the nicely adjusted 
mechanism of nature works out the design to accomplish 
which it was contrived. The natural price is reached 
through the free interplay of the factors of production, 
and it is itself an outcome of production. Nature, includ- 
ing the human factor, works to turn out the goods; and 
the natural value of the goods is their appraisement from 
the standpoint of this productive process of nature. Nat- , 
ural value is a category of production: whereas, notori- 
ously exchange value or market price is a category of 
distribution. And Adam Smith’s theoretical handling of 
market price aims to show how the factors of human pre- 
dilection and human wants at work in the higgling of the 


and rent, at the time and place in which they commonly prevail. 
When the price of any commodity is neither more nor less than 
what is sufficient to pay the rent of the land, the wages of the 
labor, and the profits of the stock employed in raising, preparing, 
and bringing it to market, according to their natural rates, the 
commodity is then sold for what may be called its natural price.” 
Wealth of Nations, Book I, chap. vii. 

14“Such commodities may continue for whole centuries to- 
gether to be sold at this high price; and that part of it which 
resolves itself into the rent of land is, in this case, the part 
which is generally paid above its natural rate.” Book I, chap. vii. 


122 Preconceptions: II 


market bring about a result in passable consonance with 
the natural laws that are conceived to -govern production. 
The natural price is a composite result of the blending 
of the three “component parts of the price of commodi-— 
ties,”"— the natural wages of laborer, the natural profits” 
of stock, and the natural rent of land; and each of these 
three components is in its turn the measure of the pro-— 
ductive effect of the factor to which it pertains. The 
further discussion of these shares in distribution aims to 
account for the facts of distribution on the ground of the 
productivity of the factors which are held to share the 
product between them. That is to say, Adam Smith’s © 
preconception of a productive natural process as the basis 
of his economic theory dominates his aims and procedure, — 
when he comes to deal with phenomena that cannot be 
stated in terms of production. The causal sequence in 
the process of distribution is, by Adam Smith’s own show- 
ing, unrelated to the causal sequence in the process of 
production; but, since the latter is the substantial fact, as” 
viewed from the standpoint of a teleological natural order, 
the former must be stated in terms of the latter before” 
Adam Smith’s sense of substantiality, or “reality,” is 
satisfied. Something of the same kind is, of course, vis- 
ible in the Physiocrats and in Cantillon. It amounts to an 
extension of the natural-rights preconception to economic 
theory. Adam Smith’s discussion of distribution as a_ 
function of productivity might be traced in detail through - 
his handling of Wages, Profits, and Rent; but, since the 
aim here is a brief characterisation only, and not an ex- 
position, no farther pursuit of this point seems feasible. 
It may, however, be worth while to point out another 
line of influence along which the dominance of the teleo- 
logical preconception shows itself in Adam Smith. Thi 
is the normalisation of data, in order to bring them int 


Preconceptions: II 123 


consonance with an orderly course of approach to the 
putative natural end of economic life and development. 
The result of this normalisation of data is, on the one 
hand, the use of what James Steuart calls “ conjectural 
history ” in dealing with past phases of economic life, and, 
on the other hand, a statement of present-day phenomena 
in terms of what legitimately ought to be according to the 
God-given end of life rather than in terms of unconstrued 
observation. Account is taken of the facts (supposed or 
observed) ostensibly in terms of causal sequence, but the 
imputed causal sequence is construed to run on lines of 
teleological legitimacy. 

A familiar instance of this “conjectural history,” in a 
highly and effectively normalized form, is the account of 
“that early and rude state of society which precedes both 
the accumulation of stock and the appropriation of 
land.” ** It is needless at this day to point out that this 
“early and rude state,” in which “the whole produce of 
labor belongs to the laborer,” is altogether a figment. The 
whole narrative, from the putative origin down, is not 
only supposititious, but it is merely a schematic presenta- 
tion of what should have been the course of past develop- 
ment, in order to lead up to that ideal economic situation 
which would satisfy Adam Smith’s preconception.1* As 
the narrative comes nearer the region of known latter-day 
facts, the normalisation of the data becomes more difficult 
and receives more detailed attention; but the change in 
method is a change of degree rather than of kind. In the 
“early and rude state” the coincidence of the “ natural ” 
and the actual course of events is immediate and undis- 

15 WVealth of Nations, Book I, chap. vi; also chap. viii. 

16 For an instance of how these early phases of industrial devel- 
‘opment appear, when not seen in the light of Adam Smith’s pre- 


conception, see, among others, Bucher, Entstehung der V olkswirt- 
schaft. 


124 Preconceptions: II 


turbed, there being no refractory data at hand; but in the 
later stages and in the present situation, where refractory 
facts abound, the codrdination is difficult, and the coin- 
cidence can be shown only by a free abstraction from phe- 
nomena that are irrelevant to the teleological trend and 
by a laborious interpretation of the rest. The facts of 
modern life are intricate, and lend themselves to statement 
in the terms of the theory oe after they have been sub- 
jected to a “ higher criticism.” 

The chapter “‘ Of the Origin and Use of Money” ™ is 
an elegantly normalised account of the origin and nature 
of an economic institution, and Adam Smith’s further dis- 
cussion of money runs on the same lines. The origin of 
money is stated in terms of the purpose which money 
should legitimately serve in such a community as Adam 
Smith considered right and good, not in terms of the 
motives and exigencies which have resulted in the use of 
money and in the gradual rise of the existing method of 
payment and accounts. Money is “the great wheel of 
circulation,” which effects the transfer of goods in proc- 
ess of production and the distribution of the finished 
goods to the consumers. It is an organ of the economic 
commonwealth rather than an expedient of accounting 
and a conventional repository of wealth. | 

It is perhaps superfluous to remark that to the “ plain 
man,” who is not concerned with the “ natural course of 
things” ina Pe Geldwirtschaft, the i that 
passes his hand is not a “ great wheel of circulation.” To 
the Samoyed, for instance, the reindeer which serves him 
as unit of value is wealth in the most concrete and tan- 
gible form. Much the same is true of coin, or even of 
bank-notes, in the apprehension of unsophisticated people 
among ourselves to-day. And yet it is in terms of the 


17 Book I, chap. iv. ¥ 


: 


Preconceptions: II 125 


habits and conditions of life of these “ plain people” that 
the development of money will have to be accounted for 
if it is to be stated in terms of cause and effect. 


The few scattered passages already cited may serve to 
illustrate how Adam Smith’s animistic or teleological bent 
shapes the general structure of his theory and gives it 
consistency. The principle of definitive formulation in 
Adam Smith’s economic knowledge is afforded by a puta- 
tive purpose that does not at any point enter causally into 
the economic life process which he seeks to know. This 
formative or normative purpose or end is not freely con- 
ceived to enter as an efficient agent in the events discussed, 
or to be in any way consciously present in the process. 
It can scarcely be taken as an animistic agency engaged 
in the process. It sanctions the course of things, and 
gives legitimacy and substance to the sequence of events, 
so far as this sequence may be made to square with the 
requirements of the imputed end. It has therefore a 
ceremonial or symbolical force only, and lends the discus- 
sion a ceremonial competency ; although with economists 
who have been in passable agreement with Adam Smith as 
regards the legitimate end of economic life this ceremo- 
nial consistency, or consistency de jure, has for many pur- 
poses been accepted as the formulation of a causal con- 
tinuity in the phenomena that have been interpreted in 
its terms. Elucidations of what normally ought to hap- 
pen, as a matter of ceremonial necessity, have in this way 
come to pass for an account of matters of fact. 

But, as has already been pointed out, there is much more 
to Adam Smith’s exposition of theory than a formulation 
of what ought to be. Much of the advance he achieved 
over his predecessors consists in a larger and more pains- 
taking scrutiny of facts, and a more consistent tracing 


“7 


out of causal continuity in the facts handled. No doubt, 
his superiority over the Physiocrats, that characteristic of 

his work by virtue of which it superseded theirs in the 

farther growth of economic science, lies to some extent 

in his recourse to a different, more modern ground of 
normality,— a ground more in consonance with the body 

of preconceptions that have had the vogue in later genera- 
tions. It is a shifting of the point of view from which the 
facts are handled; but it comes in great part to a substi- 
tution of a new body of preconceptions for the old, or a 
new adaptation of the old ground of finality, rather than 

an elimination of all metaphysical or animistic norms of 
valuation. With Adam Smith, as with the Physiocrats, 
the fundamental question, the answer to which affords the 

point of departure and the norm of procedure, is a cull 
tion of substantiality or economic “ reality.” With both, 
the answer to this question is given naively, as a deliver-— 
ance of common sense. Neither is disturbed by doubts as” 
to this deliverance of common sense or by any need of 
scrutinising it. To the Physiocrats this substantial 
ground of economic reality is the nutritive process of Na- 
ture. To Adam Smith it is Labor. His reality has the 
advantage of being the deliverance of the common sense of 
a more*modern community, and one that has maintained 
itself in force more widely and in better consonance with 
the facts of latter-day industry. The Physiocrats owe 

their preconception of the productiveness of nature to the 
| habits of thought of a community in whose economic life” 


126 Preconceptions: II 


labor to a community in which the obtrusive economic 
_ feature of the immediate past was handicraft and agri- 
\ culture, with commerce as a scarcely secondary phe- 
\ nomenon. 


Preconceptions: II 127 


So far as Adam Smith’s economic theories are a tracing 
out of the causal sequence in economic phenomena, they 
are worked out in terms given by these two main direc- 
tions of activity human effort directed to the shaping 
of the material means of life, and human effort and dis- 
cretion directed to a pecuniary gain. The former is the 
great, substantial productive force: the latter is not imme- 
diately, or proximately, productive.*® Adam Smith still 
has too lively a sense of the nutritive purpose of the order 
of nature freely to extend the concept of productiveness 
to any activity that does not yield a material increase of 
the creature comforts. His instinctive appreciation of the 
substantial virtue of whatever effectually furthers nutri- 
tion, even leads him into the concession that “ in agricul- 
ture nature labors along with man,” although the general 
tenor of his argument is that the productive force with 
which the economist always has to count is human labor. 
This recognised substantiality of labor as productive is, 
as has already been remarked, accountable for his effort 
to reduce to terms of productive labor, such a category of 
distribution as exchange value. 

With but slight qualification, it will hold that, in the 
causal sequence which Adam Smith traces out in his 
economic theories proper (contained in the first three 
books of the Wealth of Nations), the causally efficient 
factor is conceived to be human nature in these two rela- 
tions— of productive efficiency and pecuniary gain 
through exchange. Pecuniary gain— gain in the mate- / 
rial means of life through barter — furnishes the motive 
force to the economic activity of the individual; although 
productive efficiency is the legitimate, normal end of the 
community’s economic life. To such an extent does this 


— 18See Wealth of Nations, Book II, chap. v, “Of the Different 
Employment of Capitals.” 


128 Preconceptions: II 


concept of man’s seeking his ends through “ truck, barter, | 
and exchange ” pervade Adam Smith’s treatment of eco- 
nomic processes that he even states production in its 
terms, and says that “ labor was the first price, the original 
purchase-money, that was paid for all things.”1® The 
human nature engaged in this pecuniary traffic is conceived 
in somewhat hedonistic terms, and the motives and move- 
ments of men are normalised to fit the requirements of a 
hedonistically conceived order of nature. Men are very 
much alike in their native aptitudes and propensities; 7° 
and, so far as economic theory need take account of these 
aptitudes and propensities, they are aptitudes for the pro- 
duction of the “necessaries and conveniences of life,” 
and propensities to secure as great a share of these crea-_ 
ture comforts as may be. 

Adam Smith’s conception of normal human nature — 
that is to say, the human factor which enters causally in 
the process which economic theory discusses — comes, on — 
the whole, to this: Men exert their force and skill in a 
mechanical process of production, and their pecuniary 
sagacity in a competitive process of distribution, with a 
view to individual gain in the material means of life. 
These material means are sought in order to the satisfac- 
tion of men’s natural wants through their consumption. 
It is true, much else enters into men’s endeavors in the 
struggle for wealth, as Adam Smith points out; but this’ 
consumption comprises the legitimate range of incentives, 


19 Wealth of Nations, Book I, chap. vy. See also the plea for 
free trade, Book IV, chap. ii: “ But the annual revenue of eve 
society is always precisely equal to the exchangeable value of the 
whole annual produce of its industry, or, rather, is precisely th 
same thing with that exchangeable value.” 

20“ The difference of natural talents in different men is if 
reality much less than we are aware of.” Wealth of Natio 
Book I, chap. ii. ks 


Preconceptions: II 129 


and a theory which concerns itself with the natural course 
of things need take but incidental account of what does 
not come legitimately in the natural course. In point of 
fact, there are appreciable “actual,” though scarcely 
“real,” departures from this rule. They are spurious and 
insubstantial departures, and do not properly come within 
the purview of the stricter theory. And, since human na- 
ture is strikingly uniform, in Adam Smith’s apprehension, 
both the efforts put forth and the consumptive effect 
accomplished may be put in quantitative terms and treated 
algebraically, with the result that the entire range of phe- 
nomena comprised under the head of consumption need be 
but incidentally considered ; and the theory of production 
and distribution is complete when the goods or the values 
have been traced to their disappearance in the hands of 
their ultimate owners. The reflex effect of consumption 
upon production and distribution is, on the whole, quanti- 
tative only. 

Adam Smith’s preconception of a normal teleological 
order of procedure in the natural course, therefore, affects 
not only those features of theory where he is avowedly 
concerned with building up a normal scheme of the eco- 
nomic process. Through his normalising the chief causal 
factor engaged in the process, it affects also his arguments 
from cause to effect.2*_ What makes this latter feature 


21“ Mit diesen philosophischen Ueberzeugungen tritt nun Adam 
Smith an die Welt der Enfahrung heran, und es ergiebt sich ihm 
die Richtigkeit der Principien. Der Reiz der Smith’schen 
Schriften beruht zum grossen Teile darauf, dass Smith die Prin- 
cipien in so innige Verbindung mit dem Thatsachlichen gebracht. 
Hie und da werden dann auch die Principien, was durch diese 
Verbindung veranlasst wird, an ihren Spitzen etwas abgeschliffen, 
ihre allzuscharfe Auspragung dadurch vermieden. Nichtsdesto- 
weniger aber bleiben sie stets die leitenden Grundgedanken.” 
Richard Zeyss, Adam Smith und der Eigennutz (Tubingen, 1889), 
p. IIo. 


130 Preconceptions: II 


worth particular attention is the fact that his successors 
carried this normalisation farther, and employed it with 
less frequent reference to the mitigating exceptions which 
Adam Smith notices by the way. 

The reason for that farther and more consistent nor- 
malisation of human nature which gives us the “ economic 
man” at the hands of Adam Smith’s successors lies, in 
great part, in the utilitarian philosophy that entered in 
force and in consummate form at about the turning of the 
century. Some credit in the work of normalisation is due 
also to the farther supersession of handicraft by the “ cap- 
italistic”” industry that came in at the same time and in 
pretty close relation with the utilitarian views. 


After Adam Smith’s day, economics fell into profane 
hands. Apart from Malthus, who, of all the greater 
economists, stands nearest to Adam Smith on such meta- 
physical heads as have an immediate bearing upon the 
premises of economic science, the next generation do not 
approach their subject from the point of view of a di- 
vinely instituted order; nor do they discuss human inter- 
ests with that gently optimistic spirit of submission that 
belongs to the economist who goes to his work with the 
fear of God before his eyes. Even with Malthus the re- 
course to the divinely sanctioned order of nature is some- 
what sparing and temperate. But it is significant for the 
later course of economic theory that, while Malthus may 
well be accounted the truest continuer of Adam Smith, it 
was the undevout utilitarians that became the spokesmen 
of the science after Adam Smith’s time. 

There is no wide breach between Adam Smith and the 
utilitarians, either in details of doctrine or in the concrete © 
conclusions arrived at as regards questions of policy. On 


Preconceptions: IT 13 


these heads Adam Smith might well be classed as a mod- 
erate utilitarian, particularly so far as regards his eco- 
nomic work. Malthus has still more of a utilitarian air,— 
so much so, indeed, that he is not infrequently spoken of 
as a utilitarian. This view, convincingly set forth by 
Mr. Bonar,”* is no doubt well borne out by a detailed 
scrutiny of Malthus’s economic doctrines. His humani- 
tarian bias is evident throughout, and his weakness for 
considerations of expediency is the great blemish of his 
scientific work. But, for all that, in order to an appre- 
ciation of the change that came over classical economics 
with the rise of Benthamism, it is necessary to note that 
the agreement in this matter between Adam Smith and 
the disciples of Bentham, and less decidedly that between 
Malthus and the latter, is a coincidence of conclusions 
rather than an identity of preconceptions.” 

With Adam Smith the ultimate ground of economic 
freality is the design of God, the teleological order; and 
his utilitarian generalisations, as well as the hedonistic 
character of his economic man, are but methods of the 
working out of this natural order, not the substantial and 
self-legitimating ground. Shifty as Malthus’s metaphys- 
ies are, much the same is to be said for him.** Of the 
utilitarians proper the converse is true, although here, 
again, there is by no means utter consistency. The sub- 


22 See, e.g., Malthus and his Work, especially Book III, as also 
the chapter on Malthus in Philosophy and Political Economy, 
Book III, Modern Philosophy: Utilitarian Economics, chap. i, 
“ Malthus.” 

?3 Ricardo is here taken as a utilitarian of the Benthamite 

r. although | he cannot be classed as a disciple of Bentham. 

His hedonism is but the uncritically Se cetad metaphysics com- 

_ prised in the common sense of his time, and his substantial coin- 

cidence with Bentham goes to show how well diffused the hedo- 
nist preconception was at the time. 

24 Cf. Bonar, Malthus and his Work, pp. 323-336. 


ft ee 


132 Preconceptions: II 


'/ stantial economic ground is pleasure and pain: the teleo- 
| logical order (even the design of God, where that is ad- 
mitted) is the method of its working-out. 

It may be unnecessary here to go into the farther impli- 
cations, psychological and ethical, which this preconcep- 
tion of the utilitarians involves. And even this much 
may seem a taking of excessive pains with a distinction 
that marks no tangible difference. But a reading of the 
classical doctrines, with something of this metaphysics of 
political economy in mind, will show how, and in great 
part why, the later economists of the classical line di- 
verged from Adam Smith’s tenets in the early years of 
the century, until it has been necessary to interpret Adam 
Smith somewhat shrewdly in order to save him from 
heresy. 

The post-Bentham economics is substantially a theory 
of value. This is altogether the dominant feature of 
the body of doctrines; the rest follows from, or is 
adapted to, this central discipline. The doctrine of value 
is of very great importance also in Adam Smith; but 
Adam Smith’s economics is a theory of the production 
and apportionment of the material means of life. With 
Adam Smith, value is discussed from the point of view of 
production. With the utilitarians, production is discussed 
from the point of view of value. The former makes 
value an outcome of the process of production: the latter 
make production the outcome of a valuation process. 

The point of departure with Adam Smith is the “ pro- 
ductive power of labor.” ?® With Ricardo it is a pecuni- 


25 His work is an inquiry into “the Nature and Causes of the 
Wealth of Nations.” 

26“ The annual labor of every nation is the fund which 
originally supplies it with all the necessaries and conveniences of 
life which it annually consumes, and which consist always either 
in the immediate produce of that labor or in what is purchased 


Preconceptions: II 133 


ary problem concerned in the distribution of ownership ; ** 
but the classical writers are followers of Adam Smith, and 
improve upon and correct the results arrived at by him, 
and the difference of point of view, therefore, becomes 
evident in their divergence from him, and the different 
distribution of emphasis, rather than in a new and antago- 
nistic departure. 

The reason for this shifting of the center of gravity 
from production to valuation lies, proximately, in Ben- 
tham’s revision of the “principles” of morals. Ben- 
tham’s philosophical position is, of course, not a self- 
explanatory phenomenon, nor does the effect of Bentham- 
ism extend only to those who are avowed followers of 
Bentham; for Bentham is the exponent of a cultural 
change that affects the habits of thought of the entire 
community. The immediate point of Bentham’s work, as 
affecting the habits of thought of the educated community, 
is the substitution of hedonism (utility) in place of 
achievement of purpose, as a ground of legitimacy and a 
guide in the normalisation of knowledge. Its effect is 
most patent in speculations on morals, where it inculcates 
determinism. Its close connection with determinism in 
ethics points the way to what may be expected of its work- 
ing in economics. In both cases the result is that human 
action is construed in terms of the causal forces of the 
environment, the human agent being, at the best, taken as 
a mechanism of commutation, through the workings of 
which the sensuous effects wrought by the impinging 


with that produce from other nations.” Wealth of Nations, 
“Introduction and Plan,’ opening paragraph. 

27“ The produce of the earth — all that is derived from its sur- 
face by the united application of labor, machinery, and capital — 
is divided among three classes of the community. ... To deter- 
mine the laws which regulate this distribution, is the principal 
problem of political economy.” Political Economy, Preface. 


134 Preconceptions: II 


forces of the environment are, by an enforced process of 
valuation, transmuted without quantitative discrepancy 
into moral or economic conduct, as the case may be. In 
ethics and economics alike the subject-matter of the theory 
is this valuation process that expresses itself in conduct, 
resulting, in the case of economic conduct, in the pursuit 
of the greatest gain or least sacrifice. 

Metaphysically or cosmologically considered, the hu- 
man nature into the motions of which hedonistic ethics 
and economics inquire is an intermediate term in a causal 
sequence, of which the initial and the terminal members 
are sensuous impressions and the details of conduct. 
This intermediate term conveys the sensuous impulse 
without loss of force to its eventuation in conduct. For 
the purpose of the valuation process through which the 
impulse is so conveyed, human nature may, therefore, be 
accepted as uniform; and the theory of the valuation 
process may be formulated quantitatively, in terms of the 
material forces affecting the human sensory and of their 
equivalents in the resulting activity. In the language of 
economics, the theory of value may be stated in terms of — 
the consumable goods that afford the incentive to effort 
and the expenditure undergone in order to procure them. 
Between these two there subsists a necessary equality; 
but the magnitudes between which the equality subsists 
are hedonistic magnitudes, not magnitudes of kinetic 
energy nor of vital force, for the terms handled are sensu- 
ous terms. It is true, since human nature is substantially 
uniform, passive, and unalterable in respect of men’s ca- — 
pacity for sensuous affection, there may also be presumed — 
to subsist a substantial equality between the psychologi- — 
cal effect to be wrought by the consumption of goods, on 
the one side, and the resulting expenditure of kinetic or 


Preconceptions: II 135 


vital force, on the other side; but such an equality is, 
after all, of the nature of a coincidence, although there 
should be a strong presumption in favor of its prevailing 
on an average and in the common run of cases. Hedon- 
ism, however, does not postulate uniformity between men 
except in the respect of sensuous cause and effect. 

The theory of value which hedonism gives is, there- 
fore, a theory of cost in terms of discomfort. By virtue 
of the hedonistic equilibrium reached through the valua- 
tion process, the sacrifice or expenditure of sensuous 
reality involved in acquisition is the equivalent of the 
sensuous gain secured. An alternative statement might 
perhaps be made, to the effect that the measure of the 
value of goods is not the sacrifice or discomfort un- 
dergone, but the sensuous gain that accrues from the 
acquisition of the goods; but this is plainly only an 
alternative statement, and there are special reasons in 
the economic life of the time why the statement in terms 
of cost, rather than in terms of “utility,” should com- 
mend itself to the earlier classical economists. 

On comparing the utilitarian doctrine of value with 
earlier theories, then, the case stands somewhat as follows. 
The Physiocrats and Adam Smith contemplate value as 
a measure of the productive force that realises itself in 
the valuable article. With the Physiocrats this produc- 
tive force is the “anabolism” of Nature (to resort to 
a physiological term): with Adam Smith it is chiefly 
human labor directed to heightening the serviceability of 
the materials with which it is occupied. Production 
causes value in either case. The post-Bentham economics 
contemplates value as a measure of, or as measured by, 
the irksomeness of the effort involved in procuring the 
valuable goods. As Mr. E. C. K. Gonner has admirably 


136 Preconceptions: II 


pointed out,?* Ricardo — and the like holds true of classi- 
cal economics generally — makes cost the foundation of 
value, not its cause. This resting of value on cost takes 
place through a valuation. Any one who will read Adam 
Smith’s theoretical exposition to as good purpose as Mr. 
Gonner has read Ricardo will scarcely fail to find that » 
the converse is true in Adam Smith’s case. But the 
causal relation of cost to value holds only as regards © 
“natural” or “real” value in Adam Smith’s doctrine. — 
As regards market price, Adam Smith’s theory does not 
differ greatly from that of Ricardo on this head. He does ~ 
not overlook the valuation process by which market price — 
is adjusted and the course of investment is guided, and — 
his discussion of this process runs in terms that should be — 
acceptable to any hedonist. 


The shifting of the point of view that comes into eco- | 
nomics with the acceptance of utilitarian ethics and its 
correlate, the associationist psychology, is in great part a 
shifting to the ground of causal sequence as contrasted 
with that of serviceability to a preconceived end. This 
is indicated even by the main fact already cited,— that — 
the utilitarian economists make exchange value the cen- 
tral feature of their theories, rather than the conducive- 
ness of industry to the community’s material welfare. 
Hedonistic exchange value is the outcome of a valuation 
process enforced by the apprehended pleasure-giving 
capacities of the items valued. And in the utilitarian 
theories of production, arrived at from the standpoint so” 
given by exchange value, the conduciveness to welfare is 
not the objective point of the argument. This objective 
point is rather the bearing of productive enterprise upon 


28 Tn the introductory essay to his edition of Ricardo’s Politic 
Economy. See, ¢.g., paragraphs 9 and 24. 


Preconceptions: II 137 


the individual fortunes of the agents engaged, or upon 
the fortunes of the several distinguishable classes of 
beneficiaries comprised in the industrial community; for 
the great immediate bearing of exchange values upon the 
life of the collectivity is their bearing upon the distribu- 


‘tion of wealth. Value is a category of distribution. The 


result is that, as is well shown by Mr. Cannan’s discus- 
sion,”® the theories of production offered by the classical 
economists have been sensibly scant, and have been car- 
ried out with a constant view to the doctrines on dis- 
tribution. An incidental but telling demonstration of 
the same facts is given by Professor Bicher;*° and in 
illustration may be cited Torrens’s Essay on the Produc- 


tion of Wealth, which is to a good extent occupied with 


discussions of value and distribution. The classical 
theories of production have been theories of the pro- 
duction of “wealth”; and “ wealth,” in classical usage, 
consists of material things having exchange value. Dur- 
ing the vogue of the classical economics the accepted 


characteristic by which “wealth” has been defined has 


been its amenability to ownership. Neither in Adam 
Smith nor in the Physiocrats is this amenability to own- 
ership made so much of, nor is it in a similar degree 
accepted as a definite mark of the subject-matter of the 
science. 

As their hedonistic preconception would require, then, 
it is to the pecuniary side of life that the classical econo- 
mists give their most serious attention, and it is the 
pecuniary bearing of any given phenomenon or of any 
institution that commonly shapes the issue of the argu- 
ment. The causal sequence about which the discussion 


29 Theories of Production and Distribution, 1776-1848. 
| 8°Entstehung der Volkswirtschaft (second edition) Cf. 


138 Preconceptions: II : 


centers is a process of pecuniary valuation. It runs on 
distribution, ownership, acquisition, gain, investment, ex- 
change.*! In this way the doctrines on production come 
to take a pecuniary coloring; as is seen in a less de- 
gree also in Adam Smith, and even in the Physiocrats, 
although these earlier economists very rarely, if ever, lose 
touch with the concept of generic serviceability as the 
characteristic feature of production. The tradition de- 
rived from Adam Smith, which made productivity and 
serviceability the substantial features of economic life, 
was not abruptly put aside by his successors, though the 
emphasis was differently distributed by them in following 
out the line of investigation to which the tradition pointed 
the way. In the classical economics the ideas of produc- 
tion and of acquisition are not commonly held apart, and 
very much of what passes for a theory of production is 
occupied with phenomena of investment and acquisition. 
Torrens’s Essay is a case in point, though by no means an 
extreme case. 

This is as it should be; for to the consistent hedonist 
the sole motive force concerned in the industrial process 
is the self-regarding motive of pecuniary gain, and indus- 
trial activity is but an intermediate term between the 
expenditure or discomfort undergone and the pecuniary 
gain sought. Whether the end and outcome is an invid- 
ious gain for the individual (in contrast with or at the 
cost of his neighbors), or an enhancement of the facility 
of human life on the whole, is altogether a by-question in 


habits and character of the classes of the community, . 
enough still remains to constitute a separate science, the r 
enumeration of the chief terms of economics — wealth, valu 
exchange, credit, money, capital, and commodity — will suffice t to 
show.” Shirres, Analysis of the Ideas of Economics (London, 
1893), pp. 8 and 9. 


Preconceptions: II 139 


any discussion of the range of incentives by which men 
are prompted to their work or the direction which their 
efforts take. The serviceability of the given line of activ- 
ity, for the life purposes of the community or for one’s 
neighbors, “ is not of the essence of this contract.” These 
features of serviceability come into the account chiefly as 
affecting the vendibility of what the given individual has 
to offer in seeking gain through a bargain.*? 

In hedonistic theory the substantial end of economic 
life is individual gain; and for this purpose production 
and acquisition may be taken as fairly coincident, if not 
identical. Moreover, society, in the utilitarian philoso- 
phy, is the algebraic sum of the individuals; and the in- 
terest of the society is the sum of the interests of the 
individuals. It follows by easy consequence, whether 
strictly true or not, that the sum of individual gains is 
the gain of the society, and that, in serving his own in- 
terest in the way of acquisition, the individual serves the 
collective interest of the community. Productivity or 
serviceability is, therefore, to be presumed of any occupa- 
tion or enterprise that looks to a pecuniary gain; and so, 
by a roundabout path, we get back to the ancient conclu- 
sion of Adam Smith, that the remuneration of classes or 
persons engaged in industry coincides with their produc- 
tive contribution to the output of services and consum- 
able goods. 

A felicitous illustration of the working of this hedon- 
istic norm in classical economic doctrine is afforded by 

_the theory of the wages of superintendence,— an element 
in distribution which is not much more than suggested in 


82“Tf a commodity were in no way useful, ... it would be 
destitute of exchangeable value; ... (but), possessing utility, 
commodities derive their exchangeable value from two sources,” 
etc. Ricardo, Political Economy, chap. i, sect. 1. 


140 Preconceptions: II 


Adam Smith, but which receives ampler and more pains- 
taking attention as the classical body of doctrines reaches 
a fuller development. The “ wages of superintendence ” 
are the gains due to pecuniary management. They are 


the gains that come to the director of the “ business,”—_ 
not those that go to the director of the mechanical proc- 
ess or to the foreman of the shop. The latter are wages” 
simply. This distinction is not altogether clear in the 
earlier writers, but it is clearly enough contained in the 
fuller development of the theory. . 

The undertaker’s work is the management of invest- 
ment. It is altogether of a pecuniary character, and a 
proximate aim is ‘the main chance.” If it leads, indi- 
rectly, to an enhancement of serviceability or a height- 
ened aggregate output of consumable goods, that is a 
fortuitous circumstance incident to that heightened ven- 
dibility on which the investor’s gain depends. Yet the 
classical doctrine says frankly that the wages of superin- 
tendence are the remuneration of superior productivity, 
and the classical theory of production is in good part a 
doctrine of investment in which the identity of produc- 
tion and pecuniary gain is taken for granted. 

The substitution of investment in the place of industry 
as the central and substantial fact in the process of pro- 
duction is due not to the acceptance of hedonism simply, 
but rather to the conjunction of hedonism with an eco- 
nomic situation of which the investment of capital and 


33 Cf., for instance, Senior, Political Economy (London, 1872 , 
particularly pp. 88, 89, and 130-135, where the wages of superin- 
tendence are, somewhat reluctantly, classed under profits; and 
the work of superintendence is thereupon conceived as being, 
immediately or remotely, an exercise of “ abstinence” and a pro- 


apt. The like view of the wages of superintendence is an article 
of theory with more than one of the later descendants of the 
classical line. 


Preconceptions: II 141 


its management for gain was the most obvious feature. * 
The situation which shaped the common-sense apprehen- 
sion of economic facts at the time was what has since been 
called a capitalistic system, in which pecuniary enterprise 
and the phenomena of the market were the dominant and 
tone-giving facts. But this economic situation was also 
the chief ground for the vogue of hedonism in economics ; 
so that hedonistic economics may be taken as an inter- 
pretation of human nature in terms of the market-place. 
The market and the “ business world,” to which the busi- 
ness man in his pursuit of gain was required to adapt his 
motives, had by this time grown so large that the course 
of business events was beyond the control of any one 
person; and at the same time those far-reaching organisa- 
tions of invested wealth which have latterly come to 
prevail and to coerce the market were not then in the 
foreground. The course of market events took its pas- 
sionless way without traceable relation or deference to 
any man’s convenience and without traceable guidance 
towards an ulterior end. Man’s part in this pecuniary 
world was to respond with alacrity to the situation, and 
so adapt his vendible effects to the shifting demand as to 
realise something in the outcome. What he gained in 
his traffic was gained without loss to those with whom he 
dealt, for they paid no more than the goods were worth 
to them. One man’s gain need not be another’s loss; 
and, if it is not, then it is net gain to the community. 
Among the striking remoter effects of the hedonistic 
preconception, and its working out in terms of pecuniary 
_ ain, is the classical failure to discriminate between capital 
as investment and capital as industrial appliances. This 
is, of course, closely related to the point already spoken 
of. The appliances of industry further the production of 
goods, therefore capital (invested wealth) is productive; 


i 
- 
| 


142 Preconceptions: II 


| 
and the rate of its average remuneration marks the de- 
gree of its productiveness.** The most obvious fact lim- 7 
iting the pecuniary gain secured by means of invested © 
wealth is the sum invested. Therefore, capital limits the | 
productiveness of industry; and the chief and indispen- — 
sable condition to an advance in material well-being is 
the accumulation of invested wealth. In discussing the 
conditions of industrial improvement, it is usual to assume 
that “the state of the arts remains unchanged,” which is, — 
for all purposes but that of a doctrine of profits per cent., 
an exclusion of the main fact. Investments may, further, 
be transferred from one enterprise to another. There-— 
fore, and in that degree, the means of production are 
“ mobile.” 


Under the hands of the great utilitarian writers, there- 
fore, political economy is developed into a science of 
wealth, taking that term in the pecuniary sense, as things — 
amenable to ownership. The course of things in eco- 
nomic life is treated as a sequence of pecuniary events, 
and economic theory becomes a theory of what should 
happen in that consummate situation where the permuta- 
tion of pecuniary magnitudes takes place without dis- 
turbance and without retardation. In this consummate 
situation the pecuniary motive has its perfect work, and 
guides all the acts of economic man in a guileless, color- 
less, unswerving quest of the greatest gain at the least 
sacrifice. Of course, this perfect competitive system, 
with its untainted “ economic man,” is a feat of the scien- 
tific imagination, and is not intended as a competent ex- 
pression of fact. It is an expedient of abstract reasoning; 


34 Cf, Bohm-Bawerk, Capital and Interest, Books Il and IV, as 
well as the Introduction and chaps. iv and v of Book I. Bohm- 
Bawerk’s discussion bears less immediately on the present point 
than the similarity of the terms employed would suggest. 


Preconceptions: II 143 


and its avowed competency extends only to the abstract 
principles, the fundamental laws of the science, which 
hold only so far as the abstraction holds. But, as happens 
in such cases, having once been accepted and assimilated 
as real, though perhaps not as actual, it becomes an effec- 
tive constituent in the inquirer’s habits of thought, and 
goes to shape his knowledge of facts. It comes to serve 
as a norm of substantiality or legitimacy; and facts in 
some degree fall under its constraint, as is exemplified by 
many allegations regarding the “‘ tendency ” of things. 

To this consummation, which Senior speaks of as “ the 
natural state of man,” * human development tends by 
force of the hedonistic character of human nature; and in 
terms of its approximation to this natural state, therefore, 
the immature actual situation had best be stated. The 
pure theory, the “hypothetical science” of Cairnes, 
“traces the phenomena of the production and distribution 
of wealth up to their causes, in the principles of human 
nature and the laws and events — physical, political, and 
social— of the external world.” **® But since the prin- 
ciples of human nature that give the outcome in men’s 
economic conduct, so far as it touches the production and 
distribution of wealth, are but the simple and constant 
sequence of hedonistic cause and effect, the element of 
human nature may fairly be eliminated from the problem, 
with great gain in simplicity and expedition. Human 
nature being eliminated, as being a constant intermediate 
term, and all institutional features of the situation being 
also eliminated (as being similar constants under that 
natural or consummate pecuniary régime with which the 

35 Political Economy, p. 87. 

36 Character and Logical Method of Political Economy (New 
York, 1875), p. 71. Cairnes may not be altogether representa- 


tive of the high tide of classicism, but his characterisation of 
the science is none the less to the point. 


144 Preconceptions: II 


pure theory is concerned), the laws of the phenomena of © 
wealth may be formulated in terms of the remaining fac- 
tors. These factors are the vendible items that men 
handle in these processes of production and distribution ; 
and economic laws come, therefore, to be expressions of 
the algebraic relations subsisting between the various ele- 
ments of wealth and investment,— capital, labor, land, 
supply and demand of one and the other, profits, interest, — 
wages. Even such items as credit and population become — 
dissociated from the personal factor, and figure in the ~ 
computation as elemental factors acting and reaoting 
though a permutation of values over the heads of the good 
people whose welfare they are working out. 


To sum up: the classical economics, having primarily 
to do with the pecuniary side of life, is a theory of a 
process of valuation. But since the human nature at 
whose hands and for whose behoof the valuation takes 
place is simple and constant in its reaction to pecuniary 
stimulus, and since no other feature of human nature is 
legitimately present in economic phenomena than this re- 
action to pecuniary stimulus, the valuer concerned in the 
matter is to be overlooked or eliminated; and the theory 
of the valuation process then becomes a theory of the 
pecuniary interaction of the facts valued. It is a theory 
of valuation with the element of valuation left out,—a 
theory of life stated in terms of the normal paraphernalia 
of life. 

In the preconceptions with which classical economi 
set out were comprised the remnants of natural rights 
and of the order of nature, infused with that peculiarly 
mechanical natural theology that made its way into popu- 
lar vogue on British ground during the eighteenth cen- 
tury and was reduced to a neutral tone by the British 


= 


Preconceptions: II 145 


penchant for the commonplace — stronger at this time 
than at any earlier period. The reason for this growing , 
penchant for the commonplace, for the explanation of 
things in causal terms, lies partly in the growing resort 
to mechanical processes and mechanical prime movers in 
industry, partly in the (consequent) continued decline of 
the aristocracy and the priesthood, and partly in the grow- 
ing density of population and the consequent greater spe- 
cialisation and wider organisation of trade and business. 
The spread of the discipline of the natural sciences, 
largely incident to the mechanical industry, counts in the 
same direction; and obscurer factors in modern culture 
may have had their share. 

The animistic preconception was not lost, but it lost 
tone; and it partly fell into abeyance, particularly so far 
as regards its avowal. It is visible chiefly in the un- 
avowed readiness of the classical writers to accept as 
imminent and definitive any possible outcome which the 
writer’s habit or temperament inclined him to accept as 
right and good. Hence the visible inclination of classical 
economists to a doctrine of the harmony of interests, and 
their somewhat uncircumspect readiness to state their 
generalisations in terms of what ought to happen accord- 
ing to the ideal requirements of that consummate Geld- 
wirtschaft to which men “are impelled by the provisions 
of nature.” °7 By virtue of their hedonistic preconcep-! 
tions, their habituation to the ways of a pecuniary culture, 
and their unavowed animistic faith that nature is in the 
right, the classical economists knew that the consumma- 
tion to which, in the nature of things, all things tend, is 
the frictionless and beneficent competitive system. This 
competitive ideal, therefore, affords the normal, and con- 
formity to its requirements affords the test of absolute 


87 Senior, Political Economy, p. 87. 


146 Preconceptions: II 


economic truth. The standpoint so gained selectively 
guides the attention of the classical writers in their obser- 
vation and apprehension of facts, and they come to see 
evidence of conformity or approach to the normal in the 
most unlikely places. Their observation is, in great part, 
interpretative, as observation commonly is. What is pe- 
culiar to, the classical economists in this respect is their 
particular norm of procedure in the work of interpreta- 
tion. And, by virtue of having achieved a standpoint of 
absolute economic normality, they became a “ deductive ” 
school, so called, in spite of the patent fact that they were 
pretty consistently employed with an inquiry into the 
Lcausal sequence of economic phenomena. 

The generalisation of observed facts becomes a normali- 
sation of them, a statement of the phenomena in terms of 
their coincidence with, or divergence from, that normal 
tendency that makes for the actualisation of the absolute 


economic reality. This absolute or definitive ground of 


economic legitimacy lies beyond the causal sequence in 
which the observed phenomena are conceived to be inter- 
linked. It is related to the concrete facts neither as cause 
nor as effect in any such way that the causal relation may 
be traced in a concrete instance. It has little causally 
to do either with the “ mental” or with the “ physical ” 
data with which the classical economist is avowedly em- 
ployed. Its relation to the process under discussion is 
that of an extraneous — that is to say, a ceremonial — le- 
gitimation. The body of knowledge gained by its help 
and under its guidance is, therefore, a taxonomic science. 

So, by way of a concluding illustration, it may be 
pointed out that money, for instance, is normalised in 
terms of the legitimate economic tendency. It becomes 
a measure of value and a medium of exchange. It has 


become primarily an instrument of pecuniary commuta-// 


Preconceptions: II 147 


tion, instead of being, as under the earlier normalisation 
of Adam Smith, primarily a great wheel of circulation for 
the diffusion of consumable goods. The terms in which 
the laws of money, as of the other phenomena of pecuni- 
ary life, are formulated, are terms which connote its nor- 
mal function in the life history of objective values as they 
live and move and have their being in the consummate 
pecuniary situation of the “natural” state. To a similar 
work of normalisation we owe those creatures of the 
myth-maker, the quantity theory and the wages-fund. 


THE PRECONCEPTIONS OF ECONOMIC 
SCIENCE? 


Ill 


In what has already been said, it has appeared that the 
changes which have supervened in the preconceptions of 
the earlier economists constitute a somewhat orderly suc- 
cession. The feature of chief interest in this development 
has been a gradual change in the received grounds of 
finality to which the successive generations of economists 
have brought their theoretical output, on which they have 
been content to rest their conclusions, and beyond which 
they have not been moved to push their analysis of events 
or their scrutiny of phenomena. There has been a fairly 
unbroken sequence of development in what may be called — 
the canons of economic reality; or, to put it in other — 
words, there has been a precession of the point of view — 
from which facts have been handled and valued for the 
purpose of economic science. 

The notion which has in its time prevailed so widely, 
that there is in the sequence of events a consistent trend — 
which it is the office of the science to ascertain and turn 
to account,— this notion may be well founded or not. 
But that there is something of such a consistent trend in 
the sequence of the canons of knowledge under whose 
guidance the scientist works is not only a generalisation 
from the past course of things, but lies in the nature of 
the case; for the canons of knowledge are of the nature 


1 Reprinted by permission from The Quarterly Journal of 
Economics. Vol. XIV, Feb., 1900. 
148 


—=—_- 


Preconceptions: III 149 


of habits of thought, and habit does not break with the 
past, nor do the hereditary aptitudes that find expression 
in habit vary gratuitously with the mere lapse of time. 
What is true in this respect, for instance, in the domain 
of law and institutions is true, likewise, in the domain of 
science. What men have learned to accept as good and 
definitive for the guidance of conduct and of human rela- 
tions remains true and definitive and unimpeachable until 
the exigencies of a later, altered situation enforce a varia- 
tion from the norms and canons of the past, and so give 
rise to a modification of the habits of thought that decide 
what is, for the time, right in human conduct. So in 
science the ancient ground of finality remains a good and 
valid test of scientific truth until the altered exigencies 
of later life enforce habits of thought that are not wholly 
in consonance with the received notions as to what con- 
stitutes the ultimate, self-legitimating term — the substan- 
tial reality — to which knowledge in any given case must 
penetrate. 

This ultimate term or ground of knowledge is always 
of a metaphysical character. It is something in the way 
of a preconception, accepted uncritically, but applied in 
criticism and demonstration of all else with which the 
science is concerned. So soon as it comes to be criticised, 
it is in a way to be superseded by a new, more or less 
altered formulation; for criticism of it means that it is no 
longer fit to survive unaltered in the altered complex of 
habits of thought to which it is called upon to serve as 
fundamental principle. It is subject to natural selection 
and selective adaptation, as are other conventions. The 
underlying metaphysics of scientific research and purpose, 
therefore, changes gradually and, of course, incompletely, 
much as is the case with the metaphysics underlying the 
common law and the schedule of civil rights. As in the 


150 Preconceptions: III 


legal framework the now avowedly useless and meaning- 
less preconceptions of status and caste and precedent are 
even yet at the most metamorphosed and obsolescent 
rather than overpassed,— witness the facts of inheritance, 
vested interests, the outlawry of debts through lapse of 
time, the competence of the State to coerce individuals 
into support of a given policy,— so in the science the liv- 
ing generation has not seen an abrupt and traceless dis- 
appearance of the metaphysics that fixed the point of 
view of the early classical political economy. This is true 
even for those groups of economists who have most in- 
continently protested against the absurdity of the classical 
doctrines and methods. In Professor Marshall’s words, 
“There has been no real breach of continuity in the de- 
velopment of the science.” 

But, while there has been no breach, there has none the 
less been change,— more far-reaching change than some 
of us are glad to recognise; for who would not be glad to 
read his own modern views into the convincing words of 
the great masters? 

Seen through modern eyes and without effort to turn 


past gains to modern account, the metaphysical or precon- — 


ceptional furniture of political economy as it stood about 


the middle of this century may come to look quite curious. — 
The two main canons of truth on which the science pro- — 
ceeded, and with which the inquiry is here concerned, 


were: (a) a hedonistic-associational psychology, and (b) 


an uncritical conviction that there is a meliorative trend 
in the course of events, apart from the conscious ends of 


the individual members of the community. This axiom 
of a meliorative developmental trend fell into shape as a 
belief in an organic or quasi-organic (physiological) ? life 


2So, e.g., Roscher, Comte, the early socialists, J. S. Mill, and 


later Spencer, Schaeffle, Wagner. 


Preconceptions: III I51 


process on the part of the economic community or of the 
nation ; and this belief carried with it something of a con- 
straining sense of self-realising cycles of growth, ma- 
turity and decay in the life history of nations or communi- 
ties. 

Neglecting what may for the immediate purpose be 
negligible in this outline of fundamental tenets, it will 
bear the following construction. (a) On the ground of 
the hedonistic or associational psychology, all spiritual 
continuity and any consequent teleological trend is tacitly 
denied so far as regards individual conduct, where the 
later psychology, and the sciences which build on this 
later psychology, insist upon and find such a teleological 
trend at every turn. (b) Such a spiritual or quasi- 
spiritual continuity and teleological trend is uncritically 
affirmed as regards the non-human sequence or the se- 
quence of events in the affairs of collective life, where 
the modern sciences diligently assert that nothing of the 
kind is discernible, or that, if it is discernible, its recog- 
nition is beside the point, so far as concerns the purposes 
of the science. 

This position, here outlined with as little qualifica- 
tion as may be admissible, embodies*the general meta- 
physical ground of that classical political economy that 
affords the point of departure for Mill and Cairnes, 
and also for Jevons. And what is to be said of Mill 
and Cairnes in this connection will apply to the later 
course of the science, though with a gradually lessening 
force. 

By the middle of the century the psychological premises 
of the science are no longer so neat and succinct as they 
were in the days of Bentham and James Mill. At J. S. 
Mill’s hands, for instance, the naively quantitative hedon- 
ism of Bentham is being supplanted by a sophisticated 


152 Preconceptions: III 


hedonism, which makes much of an assumed qualitative 

divergence between the different kinds of pleasures that — 
afford the motives of conduct. This revision of hedon- 

istic dogma, of course, means a departure from the strict — 
hedonistic ground. Correlated with this advance more 

closely in the substance of the change than in the assign- | 
able dates, is a concomitant improvement — at least, set 
forth as an improvement — upon the received associa- 
tional psychology, whereby “ similarity” is brought in to — 
supplement “contiguity” as a ground of connection be- 
tween ideas. This change is well shown in the work of 
J.S. Mill and Bain. In spite of all the ingenuity spent in 
maintaining the associational legitimacy of this new article 
of theory, it remains a patent innovation and a departure 
from the ancient standpoint. As is true of the improved 
hedonism, so it is true of the new theory of association 
that it is no longer able to construe the process which it 
discusses as a purely mechanical process, a concatenation 
of items simply. Similarity of impressions implies a com-— 
parison of impressions by the mind in which the associa- 
tion takes place, and thereby it implies some degree of — 
constructive work on the part of the perceiving subject. 
The perceiver is thereby construed to be an agent in the 
work of perception; therefore, he must be possessed of a_ 
point of view and an end dominating the perceptive proc- 
ess. To perceive the similarity, he must be guided by an 
interest in the outcome, and must “attend.” The like ap- 
plies to the introduction of qualitative distinctions into the 
hedonistic theory of conduct. Apperception in the one 
case and discretion in the other cease to be the mere regis- 
tration of a simple and personally uncolored sequence of 
permutations enforced by the factors of the external 
world. There is implied a spiritual — that is to say, ac- 
tive —‘‘ teleological ” continuity of process on the part o 


— eS Ee 


ee 


Preconceptions: III 153 


the perceiving or of the discretionary agent, as the case 
may be. 

It is on the ground of their departure from the stricter 
hedonistic premises that Mill and, after him, Cairnes are 
able, for instance, to offer their improvement upon the 
earlier doctrine of cost of production as determining 
value. Since it is conceived that the motives which guide 
men in their choice of employments and of domicile differ 
from man to man and from class to class, not only in de- 
gree, but in kind, and since varying antecedents, of hered- 
ity and of habit, variously influence men in their choice of 
a manner of life, therefore the mere quantitative pecuni- 
ary stimulus cannot be depended on to decide the outcome 
without recourse. There are determinable variations in 
the alacrity with which different classes or communities 
respond to the pecuniary stimulus; and in so far as this 
condition prevails, the classes or communities in question 
are non-competing. Between such non-competing groups 
the norm that determines values is not the unmitigated 
norm of cost of production taken absolutely, but only 
taken relatively. The formula of cost of production is 
therefore modified into a formula of reciprocal demand. 
This revision of the cost-of-production doctrine is ex- 
tended only sparingly, and the emphasis is thrown on 
the pecuniary circumstances on which depend the forma- 
tion and maintenance of non-competing groups. Consist- 
ency with the earlier teaching is carefully maintained, so 
far as may be; but extra-pecuniary factors are, after all, 
even if reluctantly, admitted into the body of the theory. 
So also, since there are higher and lower motives, higher 
and lower pleasures,— as well as motives differing in de- 
gree,— it follows that an unguided response even to the 
Mere quantitative pecuniary stimuli may take different 
directions, and so may result in activities of widely differ- 


154 Preconceptions: III 


: 
ing outcome. Since activities set up in this way 7 
appeal to higher and lower motives are no longer con- | 
ceived to represent simply a mechanically adequate effect 
of the stimuli, working under the control of natural laws 
that tend to one beneficent consummation, therefore the 
outcome of activity set up even by the normal pecuniary 
stimuli may take a form that may or may not be service- 
able to the community. Hence laissez-faire ceases to be 
a sure remedy for the ills of society. Human interests 
are still conceived normally to be at one; but the detail | 
of individual conduct need not, therefore, necessarily serve 
these generic human interests.* Therefore, other induce-_ 
ments than the unmitigated impact of pecuniary exigen- 
cies may be necessary to bring about a coincidence of class 
or individual endeavor with the interests of the commu- 
nity. It becomes incumbent on the advocate of laissez 
faire to “ prove his minor premise.” It is no longer self- 
evident that: ‘‘ Interests left to themselves tend to har- 
monious combinations, and to the progressive preponder- 
ance of the general good.” * 

The natural-rights preconception begins to fall away as 
soon as the hedonistic mechanics have been seriously tam= 
pered with. Fact and right cease to coincide, because the 
individual in whom the rights are conceived to inhere has 


3“TLet us not confound the statement that human interests are 
at one with the statement that class interests are at one. The 
latter I believe to be as false as the former is true. .. . But 
accepting the major premises of the syllogism, that the interest ‘s 
of human beings are fundamentally the same, how as to thi 
minor?—how as to the assumption that people know t 
interests in the sense in which they are identical with the inter 
of others, and that they spontaneously follow them in 


p. 245. This question cannot consistently be asked by an ad- 
herent of the stricter hedonism. 
4 Bastiat, quoted by Cairnes, Essays, p. 310. 


Preconceptions: III 155 


come to be something more than the field of intersection 
of natural forces that work out in human conduct. The 
mechanics of natural liberty — that assumed constitution 
of things by force of which the free hedonistic play of 
the laws of nature across the open field of individual 
choice is sure to reach the right outcome — is the hedon- 
istic psychology; and the passing of the doctrine of nat- 
ural rights and natural liberty, whether as a premise or 
as a dogma, therefore coincides with the passing of that 
mechanics of conduct on the validity of which the theo- 
retical acceptance of the dogma depends. It is, therefore, 
something more than a coincidence that the half-century 
which has seen the disintegration of the hedonistic faith 
and of the associational psychology has also seen the dissi- 
pation, in scientific speculations, of the concomitant faith 
in natural rights and in that benign order of nature of 
which the natural-rights dogma is a corollary. 

It is, of course, not hereby intended to say that the 
later psychological views and premises imply a less close 
dependence of conduct on environment than do the earlier 
ones. Indeed, the reverse may well be held to be true. 
The pervading characteristic of later thinking is the con- 
stant recourse to a detailed analysis of phenomena in 
causal terms. The modern catchword, in the present con- 
nection, is “response to stimulus”; but the manner in 
which this response is conceived has changed. The fact, 
and ultimately the amplitude, at least in great part, of the 
reaction to stimulus, is conditioned by the forces in im- 
pact; but the constitution of the organism, as well as its 
attitude at the moment of impact, in great part decides 
what will serve as a stimulus, as well as what the manner 
and direction of the response will be. 

The later psychology is biological, as contrasted with 
the metaphysical psychology of hedonism. It does not 


156 Preconceptions: III 


conceive the organism as a causal hiatus. The causal 
sequence in the “ reflex arc” is, no doubt, continuous; 
but the continuity is not, as formerly, conceived in terms — 
of spiritual substance transmitting a shock: it is conceived 
in terms of the life activity of the organism. Human 
conduct, taken as the reaction of such an organism under 
stimulus, may be stated in terms of tropism, involving, of 
course, a very close-knit causal sequence between the 
impact and the response, but at the same time imputing | 
to the organism a habit of life and a self-directing and 
selective attention in meeting the complex of forces that 
make up its environment. The selective play of this trop- 
ismatic complex that constitutes the organism’s habit of 
life under the impact of the forces of the environment 
counts as discretion. 

So far, therefore, as it is to be placed in contrast withl 
the hedonistic phase of the older psychological doctrines, 
the characteristic feature of the newer conception is the” 
recognition of a selectively self-directing life process in 
the agent. While hedonism seeks the causal determinant 
of conduct in the (probable) outcome of action, the later 
conception seeks this determinant in the complex of -pro- 
pensities that constitutes man a functioning agent, that is 
to say, a personality. Instead of pleasure ultimately 
determining what human conduct shall be, the tropismatic 
propensities that eventuate in conduct ultimately deter- 

~{unine what shall be pleasurable. For the purpose in hand, 
the consequence of the transition to the altered conception 
of human nature and its relation to the environment is 
that the newer view formulates conduct in terms of per- 
sonality, whereas the earlier view was content to formu 
late it in terms of its provocation and its by-product. 
Therefore, for the sake of brevity, the older preconcep- 
tions of the science are here spoken of as construing 


Preconceptions: III 157 


human nature in inert terms, as contrasted with the newer, 
which construes it in terms of functioning. 

It has already appeared above that the second great 
article of the metaphysics of classical political economy — 


the belief in a meliorative trend or a benign order of 


nature — is closely connected with the hedonistic concep- 
tion of human nature; but this connection is more intimate 
and organic than appears from what has been said above. 
The two are so related as to stand or fall together, for the 
latter is but the obverse of the former. The doctrine of a 
trend in events imputes purpose to the sequence of events ; 
that is, it invests this sequence with a discretionary, teleo- 
logical character, which asserts itself in a constraint over 
all the steps in the sequence by which the supposed ob- 
jective point is reached. But discretion touching a given 
end must be single, and must alone cover all the acts by 
which the end is to be reached. Therefore, no discretion 
resides in the intermediate terms through which the end is 
worked out. Therefore, man being such an intermediate 
term, discretion cannot be imputed to him without violat- 
ing the supposition. Therefore, given an indefeasible 
meliorative trend in events, man is but a mechanical inter- 
mediary in the sequence. It is as such a mechanical 
intermediate term that the stricter hedonism construes 
human nature.® Accordingly, when more of teleological 
activity came to be imputed to man, less was thereby al- 
lowed to the complex of events. Or it may be put in the 
converse form: When less of a teleological continuity came 
to be imputed to the course of events, more was thereby 
imputed to man’s life process. The latter form of state- 


® It may be remarked, by the way, that the use of the differential 
calculus and similar mathematical expedients in the discussion of 
marginal utility and the like, proceeds on this psychological 
ground, and that the theoretical results so arrived at are valid to 
the full extent only if this hedonistic psychology is accepted. 


, 

: 
158 Preconceptions: III 
ment probably suggests the direction in which the causal _ 
relation runs, more nearly than the former. The change 
whereby the two metaphysical premises in question have © 
lost their earlier force and symmetry, therefore, amounts | 
to a (partial) shifting of the seat of putative personality - 
from inanimate phenomena to man. 

It may be mentioned in passing, as a detail lying per- 
haps afield, yet not devoid of significance for latter-day 
economic speculation, that this elimination of personality, 
and so of teleological content, from the sequence of events, — 
and its increasing imputation to the conduct of the human 
agent, is incident to a growing resort to an apprehension 
of phenomena in terms of process rather than in terms of - 
outcome, as was the habit in earlier schemes of knowledge. — 
On this account the categories employed are, in a gradu-— 
ally increasing degree, categories of process,— dynamic ” 
categories. But categories of process applied to conduct, 
to discretionary action, are teleological categories: 
whereas categories of process applied in the case of a_ 
sequence where the members of the sequence are not con- 
ceived to be charged with discretion, are, by the force 
of this conception itself, non-teleological, quantitative — 
categories. The continuity comprised in the concept of 
process as applied to conduct is consequently a spiritual, - 
teleological continuity: whereas the concept of process” 
under the second head, the non-teleological sequence, 
comprises a continuity of a quantitative, causal kind, sub- 
stantially the conservation of energy. In its turn the 
growing resort to categories of process in the formula- 
tion of knowledge is probably due to the epistemological 
discipline of modern mechanical industry, the technologi- 
cal exigencies of which enforce a constant recourse to the 
apprehension of phenomena in terms of process, differing 
therein from the earlier forms of industry, which neither 


~ 


Preconceptions: III 159 


obtruded visible mechanical process so constantly upon 
the apprehension nor so imperatively demanded an articu- 
late recognition of continuity in the processes actually in- 
volved. The contrast in this respect is still more pro- 
nounced between the discipline of modern life in an indus- 
trial community and the discipline of life under the con- 
ventions of status and exploit that formerly prevailed. 
To return to the benign order of nature, or the melio- 
rative trend,— its passing, as an article of economic faith, 
was not due to criticism leveled against it by the later 
classical economists on grounds of its epistemological in- 
congruity. It was tried on its merits, as an alleged 
account of facts; and the weight of evidence went against 
it. The belief in a self-realising trend had no sooner 
reached a competent and exhaustive statement — e.g., at 
Bastiat’s hands, as a dogma of the harmony of interests 
specifically applicable to the*details of economic life — 
than it began to lose ground. With his usual concision 
and incisiveness, Cairnes completed the destruction of 
Bastiat’s special dogma, and put it forever beyond a re- 
hearing. But Cairnes is not a destructive critic of the 
classical political economy, at least not in intention: he is 
an interpreter and continuer— perhaps altogether the 
clearest and truest continuer — of the classical teaching. 
While he confuted Bastiat and discredited Bastiat’s pe- 
culiar dogma, he did not thereby put the order of nature 
bodily out of the science. He qualified and improved it, 
very much as Mill qualified.and improved the tenets of the 
hedonistic psychology. As Mill and the ethical specula- 
tion of his generation threw more of personality into the 
hedonistic psychology, so Cairnes and the speculators on 
scientific method (such as Mill and Jevons) attenuated 
the imputation of personality or teleological content to the 
process of material cause and effect. The work is of 


160 Preconceptions: III 


course, by no means, an achievement of Cairnes alone; but 
he is, perhaps, the best exponent of this advance in eco- 
nomic theory. In Cairnes’s redaction this foundation of 
the science became the concept of a colorless normality. 

It was in Cairnes’s time the fashion for speculators in 
other. fields than the physical sciences to look to those 
sciences for guidance in method and for legitimation of — 
the ideals of scientific theory which they were at work 
to realize. More than that, the large and fruitful achieve- 
ments of the physical sciences had so far taken men’s 
attention captive as to give an almost instinctive predilec- 
tion for the methods that had approved themselves in that 
field. The ways of thinking which had on this ground 
become familiar to all scholars occupied with any scien- 
tific inquiry, had permeated their thinking on any subject — 
whatever. This is eminently true of British thinking. 

It had come to be a commonplace of the physical sci- 
ences that “ natural laws” are of the nature of empirical 
generalisations simply, or even of the nature of arithmeti- 
cal averages. Even the underlying preconception of the 
modern physical sciences — the law of the conservation of 
energy, or persistence of quantity — was claimed to be an 
empirical generalisation, arrived at inductively and veri- 
fied by experiment. It is true the alleged proof of the 
law took the whole conclusion for granted at the start, and 
used it constantly as a tacit axiom at every step in the 
argument which was to establish its truth; but that fact 
serves rather to emphasise than to call in question the - 
abiding faith which these empiricists had in the sole effi- 
cacy of empirical generalisation. Had they been able 
overtly to admit any other than an associational origin of 
knowledge, they would have seen the impossibility of ac- 
counting on the mechanical grounds of association for the 
premise on which all experience of mechanical fact rests. 


Preconceptions: III 161 


That any other than a mechanical origin should be as- 
signed to experience, or that any other than a so-conceived 
empirical ground was to be admitted for any general prin- 
ciple, was incompatible with the prejudices of men trained 
in the school of the associational psychology, however 
widely they perforce departed from this ideal in practice. 
Nothing of the nature of a personal element was to be 
admitted into these fundamental empirical generalisations ; 
and nothing, therefore, of the nature of a discretionary or 
teleological movement was to be comprised in the general- 
isations to be accepted as “ natural laws.” Natural laws 
must in no degree be imbued with personality, must say 
nothing of an ulterior end; but for all that they remained 
“laws” of the sequences subsumed under them. So far 
is the reduction to colorless terms carried by Mill, for 
instance, that he formulates the natural laws as empiri- 
cally ascertained sequences simply, even excluding or 
avoiding all imputation of causal continuity, as that term 
is commonly understood by the unsophisticated. In 
Mill’s ideal no more of organic connection or continuity 


‘between the members of a sequence is implied in sub- 


suming them under a law of causal relationship than is 
given by the ampersand. He is busied with dynamic 
sequences, but he persistently confines himself to static 
terms. 

Under the guidance of the associational psychology, 
therefore, the extreme of discontinuity in the deliverances 
of inductive research is aimed at by those economists — 
Mill and Cairnes being taken as typical — whose names 
have been associated with deductive methods in modern 
science. With a fine sense of truth they saw that the 
notion of causal continuity, as a premise of scientific gen- 
eralisation, is an essentially metaphysical postulate; and 
they avoided its treacherous ground by denying it, and 


162 Preconceptions: III 


construing causal sequence to mean a uniformity of co- 
existences and successions simply. But, since a strict 
uniformity is nowhere to be observed at first hand in the 
phenomena with which the investigator is occupied, it has 
to be found by a laborious interpretation of the phe- 
nomena and a diligent abstraction and allowance for dis- 
turbing circumstances, whatever may be the meaning of a 
disturbing circumstance where causal continuity is denied. 
In this work of interpretation and expurgation the inves- 
tigator proceeds on a conviction of the orderliness of the 
natural sequence. “ Natura non facit saltum”: a maxim 
which has no meaning within the stricter limits of the 
associational theory of knowledge. 

Before anything can be said as to the orderliness of the 
sequence, a point of view must be chosen by the specu- 
lator, with respect to which the sequence in question does 
or does not fulfill this condition of orderliness ; that is to 
say, with respect to which it is a sequence. The endeavor 
to avoid all metaphysical premises fails here as every- 
where. The associationists, to whom economics owes its 
transition from the older classical phase to the modern or 
quasi-classical, chose as their guiding point of view the 
metaphysical postulate of congruity—in substance, the 
“similarity ” of the associationist theory of knowledge. 
This must be called their proton pseudos, if associationism 
pure and simple is to be accepted. The notion of con- 
gruity works out in laws of resemblance and equivalence, — 
in both of which it is plain to the modern psychologist 
that a metaphysical ground of truth, antecedent to and 
controlling empirical data, is assumed. But the use of 
the postulate of congruence as a test of scientific truth 
has the merit of avoiding all open dealing with an imputed 
substantiality of the data handled, such as would be in- 
volved in the overt use of the concept of causation. The 


Preconceptions: III 163 


data are congruous among themselves, as items of knowl- 
edge; and they may therefore be handled in a logical 
synthesis and concatenation on the basis of this congru- 
ence alone, without committing the scientist to an impu- 
tation of a kinetic or motor relation between them. The 
metaphysics of process is thereby avoided, in appearance. 
The sequences are uniform or consistent with one an- 
other, taken as articles of theoretical synthesis simply; 
and so they become elements of a system or discipline of 
knowledge in which the test of theoretical truth is the 
congruence of the system with its premises. 

In all this there is a high-wrought appearance of matter- 
of-fact, and all metaphysical subreption of a non-empirical 
or non-mechanical standard of reality or substantiality is 
avoided in appearance. The generalisations which make 
up such a system of knowledge are, in this way, stated in 
terms of the system itself; and when a competent formu- 
lation of the alleged uniformities has been so made in 
terms of their congruity or equivalence with the prime 
postulates of the system, the work of theoretical inquiry 
is done. 

The concrete premises from which proceeds the sys- 
tematic knowledge of this generation of economists are 
certain very concise assumptions concerning human na- 
ture, and certain slightly less concise generalisations of 
physical fact,° presumed to be mechanically empirical gen- 
eralisations. These postulates afford the standard of nor- 
mality. Whatever situation or course of events can be 
shown to express these postulates without mitigation is 
normal; and wherever a departure from this normal 
course of things occurs, it is due to disturbing causes,— 
that is to say, to causes not comprised in the main prem- 


®See, e.g., Cairnes, Character and Logical Method (New 
York), p. 71. 


164 Preconceptions: III 


ises of the science,— and such departures are to be taken 
account of by way of qualification. Such departures and 
such qualification are constantly present in the facts to be 
handled by the science ; but, being not congruous with the 
underlying postulates, they have no place in the body of 
the science. The laws of the science, that which makes 
up the economist’s theoretical knowledge, are laws of the 
normal case. The normal case does not occur in concrete 
fact. These laws are, therefore, in Cairnes’s terminology, 
“hypothetical” truths; and the science is a “hypotheti- — 
cal” science. They apply to concrete facts only as the 
facts are interpreted and abstracted from, in the light of 
the underlying postulates. The science is, therefore, a 
theory of the normal case, a discussion of the concrete 
facts of life in respect of their degree of approximation 
to the normal case. That is to say, it is a taxonomic 
science. 
Of course, in the work actually done by these econo- 
mists this standpoint of rigorous normality is not con-— 
sistently maintained; nor is the unsophisticated imputa- 
tion of causality to the facts under discussion consistently 
avoided. The associationist postulate, that causal se- 
quence means empirical uniformity simply, is in great 
measure forgotten when the subject-matter of the science 
is handled in detail. Especially is it true that in Mill the 
dry light of normality is greatly relieved by a strong com- 
mon sense. But the great truths or laws of the science 
remain hypothetical laws ; and the test of scientific reality 
is congruence with the hypothetical laws, not coincidence 
with matter-of-fact events. 
The earlier, more archaic metaphysics of the science, 
which saw in the orderly correlation and sequence of 
events a constraining guidance of an extra-causal, teleo- 
logical kind, in this way becomes a metaphysics of nor- 


Preconceptions: III 165 


mality which asserts no extra-causal constraint over 
events, but contents itself with establishing correlations, 
equivalencies, homologies, and theories concerning the 
conditions of an economic equilibrium. The movement, 
the process of economic life, is not overlooked, and it 
may even be said that it is not neglected; but the pure 
theory, in its final deliverances, deals not with the dy- 
namics, but with the statics of the case. The concrete 
subject-matter of the science is, of course, the process of 
economic life,— that is unavoidably the case,— and in so 
far the discussion must be accepted as work bearing on 
the dynamics of the phenomena discussed; but even then 
it remains true that the aim of this work in dynamics is a 
determination and taxis of the outcome of the process 
under discussion rather than a theory of the process as 
such. The process is rated in terms of the equilibrium 
to which it tends or should tend, not conversely. The 
outcome of the process, taken in its relation of equivalence 
within the system, is the point at which the inquiry comes 
to rest. It is not primarily the point of departure for an 
inquiry into what may follow. The science treats of a 
balanced system rather than of a proliferation. In this 
lies its characteristic difference from the later evolution- 
ary sciences. It is this characteristic bent of the science 
that leads its spokesman, Cairnes, to turn so kindly to 
chemistry rather than to the organic sciences, when he 
seeks an analogy to economics among the physical sci- 
ences.’ What Cairnes has in mind in his appeal to chem- 
istry is, of course, the received, extremely taxonomic 
(systematic) chemistry of his own time, not the tenta- 
tively genetic theories of a slightly later day. 


It may seem that in the characterisation just offered of 


7 Character and Logical Method, p. 62. 


166 Preconceptions: III 


the standpoint of normality in economics there is too 

strong an implication of colorlessness and impartiality. 

The objection holds as regards much of the work of the 

modern economists of the classical line. It will hold true 

even as to much of Cairnes’s work; but it cannot be ad- 

mittéd as regards Cairnes’s ideal of scientific aim and 

methods. The economists whose theories Cairnes re- 
ceived and developed, assuredly did not pursue the dis- 

cussion of the normal case with an utterly dispassionate — 
animus. They had still enough of the older teleological | 
metaphysics left to give color to the accusation brought — 
against them that they were advocates of laissez-faire. 
The preconception of the utilitarians,— in substance the 
natural-rights preconception,— that unrestrained human 
conduct will result in the greatest human happiness, re- — 
tains so much of its force in Cairnes’s time as is implied 
in the then current assumption that what is normal is also 
right. The economists, and Cairnes among them, not 
only are concerned to find out what is normal and to deter- 
mine what consummation answers to the normal, but they 
also are at pains to approve that consummation. It is” 
this somewhat uncritical and often unavowed identifica- 
tion of the normal with the right that gives colorable 
ground for the widespread vulgar prejudice, to which 
Cairnes draws attention,® that political economy “ sanc-_ 
tions ”’ one social arrangement and “ condemns ” another. 
And it is against this uncritical identification of two essen- 
tially unrelated principles or categories that Cairnes’s 
essay on “ Political Economy and Laissez-faire,” and in 
good part also that on Bastiat, are directed. But, while 
this is one of the many points at which Cairnes has sub- 
stantially advanced the ideals of the science, his own con-. 
cluding argument shows him to have been but half-wa 


8 Essays in Political Economy, pp. 260-264. 


Preconceptions: III 167 


emancipated from the prejudice, even while most effec- 
tively combating it.° It is needless to point out that the 
like prejudice is still present in good vigor in many later 
economists who have had the full benefit of Cairnes’s 
teachings on this head.1° Considerable as Cairnes’s 
achievement in this matter undoubtedly was, it effected 
a mitigation rather than an elimination of the untenable 
metaphysics against which he contended. 

The advance in the general point of view from animis- 
tic teleology to taxonomy is shown in a curiously succinct 
manner in a parenthetical clause of Cairnes’s in the chap- 
ter on Normal Value.*t With his acceptance of the later 
point of view involved in the use of the new term, Cairnes 
‘becomes the interpreter of the received theoretical results. 
The received positions are not subjected to a destructive 
criticism. The aim is to complete them where they fall 
short and to cut off what may be needless or what may 
run beyond the safe ground of scientific generalisation. 
In his work of redaction, Cairnes does not avow — prob- 
ably he is not sensible of — any substantial shifting of the 
point of view or any change in the accepted ground of 
theoretic reality. But his advance to an unteleological 
taxonomy none the less changes the scope and aim of his 
theoretical discussion. The discussion of Normal Value 
may be taken in illustration. 

Cairnes is not content to find (with Adam Smith) that 
value will “naturally” coincide with or be measured by 


® See especially Essays, pp. 263, 264. 

10 Jt may be interesting to point out that the like identification 
of the categories of normality and right gives the dominant note 
of Mr. Spencer’s ethical and social philosophy, and that later 
economists of the classical line are prone to be Spencerians. 

11“ Normal value (called by Adam Smith and Ricardo ‘ natural 
value,’ and by Mill ‘necessary value,’ but best expressed, it seems 
to me, by the term which I have used).” Leading Principles 
(New York), p. 45. 


168 Preconceptions: III 


cost of production, or even (with Mill) that cost of pro- 

duction must, in the long run, “ necessarily ” determine — 
value. “This . . . is to take a much too limited view of — 
the range of this phenomenon.” #2 He is concerned to 
determine not only this general tendency of values to a 
normal, but all those characteristic circumstances as well 
which condition this tendency and which determine the 
normal to which values tend. His inquiry pursues the 
phenomena of value in a normal economic system rather 
than the manner and rate of approach of value relations — 
to a teleologically or hedonistically defensible consumma- 
tion. It therefore becomes an exhaustive but very dis- 
criminating analysis of the circumstances that bear upon 
market values, with a view to determine what circum- 
stances are normally present; that is to say, what circum- 
stances conditioning value are commonly effective and at 
the same time in consonance with the premises of eco- 
nomic theory. These effective conditions, in so far as 
they are not counted anomalous and, therefore, to be set 
aside in the theoretical discussion, are the circumstances 
under which a hedonistic valuation process in any modern 
industrial community is held perforce to take place,— the 
circumstances which are held to enforce a recognition and 
rating of the pleasure-bearing capacity of facts. The 
are not, as under the earlier cost-of-production doctrines, 
the circumstances which determine the magnitude of the 
forces spent in the production of the valuable article 
Therefore, the normal (natural) value is no longer (as 
with Adam Smith, and even to some extent with his 
classical successors) the primary or initial fact in value 
theory, the substantial fact of which the market value is 
an approximate expression and by which the latter is 
controlled. The argument does not, as formerly, set out 


12 Leading Principles, p. 45. 


} 


Preconceptions: III 169 


from that expenditure of personal force which was once 
conceived to constitute the substantial value of goods, and 
then construe market value to be an approximate and 
uncertain expression of this substantial fact. The direc- 
tion in which the argument runs is rather the reverse of 
this. The point of departure is taken from the range of 
market values and the process of bargaining by which 
these values are determined. This latter is taken to be 
a process of discrimination between various kinds and 
degrees of discomfort, and the average or consistent out- 
come of such a process of bargaining constitutes normal 
value. It is only by virtue of a presumed equivalence 
between the discomfort undergone and the concomitant 
expenditure, whether of labor or of wealth, that the nor- 
mal value so determined is conceived to be an expression 
of the productive force that goes into the creation of the 
valuable goods. Cost being only in uncertain equivalence 
with sacrifice or discomfort, as between different persons, 
the factor of cost falls into the background; and the 
process of bargaining, which is in the foreground, being 
a process of valuation, a balancing of individual demand 
and supply, it follows that a law of reciprocal demand 
comes in to supplant the law of cost. In all this the 
proximate causes at work in the determination of values 
are plainly taken account of more adequately than in 
earlier cost-of-production doctrines; but they are taken 
account of with a view to explaining the mutual adjust- 
ment and interrelation of elements in a system rather than 
to explain either a developmental sequence or the working 
out of a foreordained end. 

This revision of the cost-of-production doctrine, 
whereby it takes the form of a law of reciprocal demand, 
is in good part effected by a consistent reduction of cost 
to terms of sacrifice,— a reduction more consistently car- 


170 Preconceptions: IIT 


ried through by Cairnes than it had been by earlier hedon- 
ists, and extended by Cairnes’s successors with even more 
far-reaching results. By this step the doctrine of cost is 
not only brought into closer accord with the neo-hedon- 
istic premises, in that it in a greater degree throws the 
stress upon the factor of personal discrimination, but it 
also gives the doctrine a more general bearing upon 
economic conduct and increases its serviceability as a com- 
prehensive principle for the classification of economic 
phenomena. In the further elaboration of the hedonistic 
theory of value at the hands of Jevons and the Austrians 
the same principle of sacrifice comes to serve as the chief 
ground of procedure. 


Of the foundations of later theory, in so far as the pos- 
tulates of later economists differ characteristically from 
those of Mill and Cairnes, little can be said in this place. 
Nothing but the very general features of the later develop- 
ment can be taken up; and even these general features of 
the existing theoretic situation can not be handled with 
the same confidence as the corresponding features of a 
past phase of speculation. With respect to writers of the 
present or the more recent past the work of natural selec- 
tion, as between variants of scientific aim and animus and 
between more or less divergent points of view, has not yet 
taken effect; and it would be over-hazardous to attempt 
an anticipation of the results of the selection that lies in 
great part yet in the future. As regards the directions of 
theoretical work suggested by the names of Professor 
Marshall, Mr. Cannan, Professor Clark, Mr. Pierson, 
Professor Loria, Professor Schmoller, the Austrian 
group,— no off-hand decision is admissible as between 
these candidates for the honor, or, better, for the work, 
of continuing the main current of economic speculation 


ane Pa 


Preconceptions: III 171 


and inquiry. No attempt will here be made even to pass 
a verdict on the relative claims of the recognised two or 
three main “schools” of theory, beyond the somewhat 
obvious finding that, for the purpose in hand, the so- 
called Austrian school is scarcely distinguishable from the 
neo-classical, unless it be in the different distribution of 
emphasis. The divergence between the modernised clas- 
sical views, on the one hand, and the historical and Marx- 
ist schools, on the other hand, is wider——so much so, 
indeed, as to bar out a consideration of the postulates of 
the latter under the same head of inquiry with the former. 
The inquiry, therefore, confines itself to the one line 
standing most obviously in unbroken continuity with that 
body of classical economics whose life history has been 
traced in outline above. And, even for this phase of 
modernised classical economics, it seems necessary to 
limit discussion, for the present, to a single strain, se- 
lected as standing peculiarly close to the classical source, 
at the same time that it shows unmistakable adapta- 
tion to the later habits of thought and methods of knowl- 
edge. 

For this later development in the classical line of politi- 
cal economy, Mr. Keynes’s book may fairly be taken as 
the maturest exposition of the aims and ideals of the sci- 
ence ; while Professor Marshall excellently exemplifies the 
best work that is being done under the guidance of the 
classical antecedents. As, after a lapse of a dozen or 
fifteen years from Cairnes’s days of full conviction, Mr. 
Keynes interprets the aims of modern economic science, 
it has less of the “ hypothetical” character assigned it by 
Cairnes ; that is to say, it confines its inquiry less closely 
to the ascertainment of the normal case and the interpre- 
tative subsumption of facts under the normal. It takes 
fuller account of the genesis and developmental continuity 


of all features of modern economic life, gives more and 
closer attention to institutions and their history. This is, 
no doubt, due, in part at least, to impulse received from 
German economists; and in so far it also reflects the pe- 
culiarly vague and bewildered attitude of protest that 
characterises the earlier expositions of the historical 
school. To the same essentially extraneous source is 
traceable the theoretic blur embodied in Mr. Keynes’s atti- 
tude of tolerance towards the conception of economics as 
a “normative” science having to do with “economic 
ideals,” or an “applied economics” having to do with 
“ economic precepts.” 4% An inchoate departure from the _ 
consistent taxonomic ideals shows itself in the tentative 
resort to historical and genetic formulations, as well as in 
Mr. Keynes’s pervading inclination to define the scope of 
the science, not by exclusion of what are conceived to be 
non-economic phenomena, but by disclosing a point of 
view from which all phenomena are seen to be economic 
facts. The science comes to be characterised not by the ~ 
delimitation of a range of facts, as in Cairnes,’* but as an 
inquiry into the bearing which all facts have upon men’s 
economic activity. It is no longer that certain phenomena 
belong within the science, but rather that the science is 
concerned with any and all phenomena as seen from the 
point of view of the economic interest. Mr. Keynes does 
not go fully to the length which this last proposition indi- — 
cates. He finds * that political economy “treats of the 
phenomena arising out of the economic activities of man- 
kind in society ”; but, while the discussion by which he 


172 Preconceptions: III : 


13 Scope and Method of Political Economy (London, 1891), 
chaps. i and ii. 
14 Character and Logical Method; e.g., Lecture II, especially 


pp. 53, 54, and 71. oy 
15 Scope and Method of Political Economy, chap. iii, particu- 


larly p. 97. 


Preconceptions: III 173 


leads up to this definition might be construed to say that 
all the activities of mankind in society have an economic 
bearing, and should therefore come within the view of the 
science, Mr. Keynes does not carry out his elucidation of 
the matter to that broad conclusion. Neither can it be 
said that modern political economy has, in practice, taken 
on the scope and character which this extreme position 
would assign it. 

The passage from which the above citation is taken is 
highly significant also in another and related bearing, and 
it is at the same time highly characteristic of the most 
effective modernised classical economics. The subject- 
matter of the science has come to be the “ economic ac- 
tivities ” of mankind, and the phenomena in which these 
activities manifest themselves. So Professor Marshall’s 
work, for instance, is, in aim, even if not always in 
achievement, a theoretical handling of human activity in 
its economic bearing,—an inquiry into the multiform 
phases and ramifications of that process of valuation of 
the material means of life by virtue of which man is an 
economic agent. And still it remains an inquiry directed 
to the determination of the conditions of an equilibrium 
of activities and a quiescent normal situation. It is not 
in any eminent degree an inquiry into cultural or institu- 
tional development as affected by economic exigencies or 
by the economic interest of the men whose activities are 
analysed and portrayed. Any sympathetic reader of Pro- 
fessor Marshall’s great work — and that must mean every 
reader — comes away with a sense of swift and smooth 
movement and interaction of parts; but it is the movement 
of a consummately conceived and self-balanced mechan- 
ism, not that of a cumulatively unfolding process or an 
institutional adaptation to cumulatively unfolding exigen- 
cies. The taxonomic bearing is, after all, the dominant 


174 Preconceptions: III 


feature. It is significant of the same point that even in 
his discussion of such vitally dynamic features of the 
economic process as the differential effectiveness of differ- 
ent laborers or of different industrial plants, as well as of 
the differential advantages of consumers, Professor Mar- 
shall’resorts to an adaptation of so essentially taxonomic 
a category as the received concept of rent. Rent is a pe- 
cuniary category, a category of income, which is essen- 
tially a final term, not a category of the motor term, work 
or interest.1° It is not a factor or a feature of the process 
of industrial life, but a phenomenon of the pecuniary situ- 
ation which emerges from this process under given con- 
ventional circumstances. However far-reaching and va- 
rious the employment of the rent concept in economic 
theory has been, it has through all permutations remained, 
what it was to begin with, a rubric in the classification of 
incomes. It is a pecuniary, not an industrial category. 
In so far as resort is had to the rent concept in the for- 
mulation of a theory of the industrial process,—as in 
Professor Marshall’s work,— it comes to a statement of 
the process in terms of its residue. Let it not seem pre- 
sumptuous to say that, great and permanent as is the value 
of Professor Marshall’s exposition of quasi-rents and the 
like, the endeavor which it involves to present in terms of 
a concluded system what is of the nature of a fluent proc- 
ess has made the exposition unduly bulky, unwieldy, and 
inconsequent. 

There is a curious reminiscence of the perfect taxo- 
nomic day in Mr. Keynes’s characterisation of political 


‘ 


economy as a “ positive science,” “the sole province of | 
which is to establish economic uniformities ”;?7 and, in — 


16 “Tnterest”’ is, of course, here used in the sense which it has — 


in modern psychological discussion. 
17, Scope and Method of Political Economy, p. 46. 


> 


, 


Preconceptions: III 175 


this resort to the associationist expedient of defining a 
natural law as a “ uniformity,” Mr. Keynes is also borne 
out by Professor Marshall.** But this and other sur- 
vivals of the taxonomic terminology, or even of the taxo- 
nomic canons of procedure, do not hinder the economists 
of the modern school from doing effective work of a char- 
acter that must be rated as genetic rather than taxonomic. 
Professor Marshall’s work in economics is not unlike that 
of Asa Gray in botany, who, while working in great part 
within the lines of “systematic botany ” and adhering to 
its terminology, and on the whole also to its point of view, 
very materially furthered the advance of the science out- 
side the scope of taxonomy. 

Professor Marshall shows an aspiration to treat eco- 
nomic life as a development; and, at least superficially, 
much of his work bears the appearance of being a discus- 
sion of this kind. In this endeavor his work is typical of 
what is aimed at by many of the later economists. The 
aim shows itself with a persistent recurrence in his Prin- 
ciples. His chosen maxim is, “ Natura non facit saltum,” 
—a maxim that might well serve to designate the prevail- 
ing attitude of modern economists towards questions of 
economic development as well as towards questions of 
classification or of economic policy. His insistence on the 
continuity of development and of the economic structure 
of communities is a characteristic of the best work along 
the later line of classical political economy. All this gives 
an air of evolutionism to the work. Indeed, the work of 
the neo-classical economics might be compared, probably 
without offending any of its adepts, with that of the early 
generation of Darwinians, though such a comparison 
might somewhat shrewdly have to avoid any but super- 


18 Principles of Economics, Vol. 1, Book I, chap. vi, sect. 6, 
especially p. 105 (3d edition). 


176 Preconceptions: III 


ficial features. Economists of the present day are com- 
- monly evolutionists, in a general way. They commonly 
accept, as other men do, the general results of the evolu- 
tionary speculation in those directions in which the evolu- 
tionary method has made its way. But the habit of 
handling by evolutionist methods the facts with which 
their own science is concerned has made its way among 
the economists to but a very uncertain degree. 

The prime postulate of evolutionary science, the precon- 
ception constantly underlying the inquiry, is the notion of 
a cumulative causal sequence; and writers on economics 
are in the habit of recognising that the phenomena with 
which they are occupied are subject to such a law of de- 
velopment. Expressions of assent to this proposition 
abound. But the economists have not worked out or hit 
upon a method by which the inquiry in economics may 
consistently be conducted under the guidance of this pos- 
tulate. Taking Professor Marshall as exponent, it ap- 
pears that, while the formulations of economic theory are 
not conceived to be arrived at by way of an inquiry into 
the developmental variation of economic institutions and 
the like, the theorems arrived at are held, and no doubt 
legitimately, to apply to the past,’® and with due reserve 
also to the future, phases of the development. But these 
theorems apply to the various phases of the development 
not as accounting for the developmental sequence, but as 
limiting the range of variation. They say little, if any- 
thing, as to the order of succession, as to the derivation 
and the outcome of any given phase, or as to the causal 
relation of one phase of any given economic convention or 
scheme of relations to any other. They indicate the con- 
ditions of survival to which any innovation is subject, sup- 


19 See, ¢.g., Professor Marshall’s “Reply” to Professor Cun- — 


ningham in the Economic Journal for 1892, pp. 508-113. 


| 
t 


Preconceptions: III 177 


posing the innovation to have taken place, not the condi- 
tions of variational growth. The economic laws, the 
“statements of uniformity,’ are therefore, when con- 
strued in an evolutionary bearing, theorems concerning 
the superior or the inferior limit of persistent innovations, 
as the case may be.?° It is only in this negative, selective 
bearing that the current economic laws are held to be 
laws of developmental continuity ; and it should be added 
that they have hitherto found but relatively scant applica- 
tion at the hands of the economists, even for this purpose. 

Again, as applied to economic activities under a given 
situation, as laws governing activities in equilibrium, the 
economic laws are, in the main, laws of the limits within 


_which economic action of a given purpose runs. They 


are theorems as to the limits which the economic (com- 
monly the pecuniary) interest imposes upon the range of 
activities to which the other life interests of men incite, 
rather than theorems as to the manner and degree in 
which the economic interest creatively shapes the general 
scheme of life. In great part they formulate the normal 
inhibitory effect of economic exigencies rather than the 
cumulative modification and diversification of human ac- 
tivities through the economic interest, by initiating and 
guiding habits of life and of thought. This, of course, 
does not go to say that economists are at all slow to 
credit the economic exigencies with a large share in the 
growth of culture ; but, while claims of this kind are large 
and recurrent, it remains true that the laws which make 
up the framework of economic doctrine are, when con- 
strued as generalisations of causal relation, laws of con- 
servation and selection, not of genesis and proliferation. 
The truth of this, which is but a commonplace generalisa- 


20 This is well illustrated by what Professor Marshall says of 
the Ricardian law of rent in his “ Reply,” cited above. 


178 Preconceptions: III 


tion, might be shown in detail with respect to such funda- 
mental theorems as the laws of rent, of profits, of wages, 
of the increasing or diminishing returns of industry, of — 
population, of competitive prices, of cost of production. 

In consonance with this quasi-evolutionary tone of the 
neo-classical political economy, or as an expression of it, 
comes the further clarified sense that nowadays attaches 
to the terms “ normal” and economic “laws.” The laws 
have gained in colorlessness, until it can no longer be said 
that the concept of normality implies approval of the phe-— 
nomena to which it is applied.2t They are in an increas- 
ing degree laws of conduct, though they still continue to_ 
formulate conduct in hedonistic terms; that is to say, — 
conduct is construed in terms of its sensuous effect, not in 
terms of its teleological content. The light of the science 
is a drier light than it was, but it continues to be shed 
upon the accessories of human action rather than upon 
the process itself. The categories employed for the pur- 
pose of knowing this economic conduct with which the 
scientists occupy themselves are not the categories under 
which the men at whose hands the action takes place them- 
selves apprehend their own action at the instant of acting. 
Therefore, economic conduct still continues to be some- 
what mysterious to the economists ; and they are forced to 
content themselves with adumbrations whenever the dis- 
cussion touches this central, substantial fact. 

All this, of course, is intended to convey no dispraise of 
the work done, nor in any way to disparage the theories 
which the passing generation of economists have elabo- 
rated, or the really great and admirable body of knowledge 
which they have brought under the hand of the science; _ 


21 See, ¢.g., Marshall, Principles, Book I, chap. vi, sect. 6, pp. 
105-108. The like dispassionateness is visible in most other 
modern writers on theory; as, e.g., Clark, Cannan, and the 
Austrians. 


Preconceptions: III 179 


but only to indicate the direction in which the inquiry in 
its later phases — not always with full consciousness — is 
shifting as regards its categories and its point of view. 
The discipline of life in a modern community, particu- 
larly the industrial life, strongly reenforced by the modern 
sciences, has divested our knowledge of non-human phe- 
nomena of that fullness of self-directing life that was 
once imputed to them, and has reduced this knowledge to 
terms of opaque causal sequence. It has thereby nar- 
rowed the range of discretionary, teleological action to the 
human agent alone; and so it is compelling our knowledge 
of human conduct, in so far as it is distinguished from the 
non-human, to fall into teleological terms. Foot-pounds, 
calories, geometrically progressive procreation, and doses 
of capital, have not been supplanted by the equally un- 
couth denominations of habits, propensities, aptitudes, and 
conventions, nor does there seem to be any probability that 
they will be; but the discussion which continues to run 
in terms of the former class of concepts is in an increasing 
degree seeking support in concepts of the latter class. 


PROFESSOR CLARK’S ECONOMICS + 


For some time past economists have been looking with 
lively anticipation for such a comprehensive statement of 
Mr. Clark’s doctrines as is now offered. The leading 
purpose of the present volume? is “to offer a brief and 
provisional statement of the more general laws of prog- 
ress”; although it also comprises a more abridged re- 
statement of the laws of “ Economic Statics ” already set- 
forth in fuller form in his Distribution of Wealth. 
Though brief, this treatise is to be taken as systematically 
complete, as including in due correlation all the “ essen- 
tials” of Mr. Clark’s theoretical system. As such, its 
publication is an event of unusual interest and conse- 
quence. 

Mr. Clark’s position among this generation of econo- 
mists is a notable and commanding one. No serious stu- 
dent of economic theory will, or can afford to, forego a 
pretty full acquaintance with his development of doc- 
trines. Nor will any such student avoid being greatly in- 
fluenced by the position which Mr. Clark takes on any 
point of theory on which he may speak, and many loo 
confidently to him for guidance where it is most needed. 
Very few of those interested in modern theory are unde: 
no obligations to him. He has, at the same time, in a 
singular degree the gift of engaging the affections as well 
as the attention of students in his field. Yet the critic is 


1Reprinted by permission from The Quarterly Journal of 
Economics, Vol. XXII, Feb., 1908. ; 
2The Essentials of Economic Theory, as Applied to Mode 
Problems of Industry and Public Policy. By John Bates Clark 
New York: The Macmillan ye ae 1907. 
I 


Professor Clark’s Economics 181 


required to speak impersonally of Mr. Clark’s work as a 
phase of current economic theory. 

In more than one respect Mr. Clark’s position among 
economists recalls the great figures in the science a hun- 
dred years ago. There is the same rigid grasp of the 
principles, the “essentials,” out of which the broad the- 
orems of the system follow in due sequence and correla- 
tion; and like the leaders of the classical era, while Mr. 
Clark is always a theoretician, never to be diverted into 
an inconsistent makeshift, he is moved by an alert and 
sympathetic interest in current practical problems. While 
his aim is a theoretical one, it is always with a view to the 
theory of current affairs; and his speculations are ani- 
mated with a large sympathy and an aggressive interest 
in the amelioration of the lot of man. 

His relation to the ancient adepts of the science, how- 
ever, is something more substantial than a resemblance 
only. He is, by spiritual consanguinity, a representative 
of that classical school of thought that dominated the 
science through the better part of the nineteenth century. 
This is peculiarly true of Mr. Clark, as contrasted with 
many of those contemporaries who have fought for the 
marginal-utility doctrines. Unlike these spokesmen of 
the Austrian wing, he has had the insight and courage to 
see the continuity between the classical position and his 
own, even where he advocates drastic changes in the 
classical body of doctrines. And although his system of 
theory embodies substantially all that the consensus of 
theorists approves in the Austrian contributions to the 
science, yet he has arrived at his position on these heads 
not under the guidance of the Austrian school, but, avow- 
edly, by an unbroken development out of the position 
given by the older generation of economists. Again, in 


3 Cf., e.g.. The Distribution of Wealth, p. 376, note. 


182 Professor Clark’s Economics 


the matter of the psychological postulates of the science, 
he accepts a hedonism as simple, unaffected, and uncritical — 
as that of Jevons or of James Mill. In this respect his 
work is as true to the canons of the classical school as the 
best work of the theoreticians of the Austrian observance. — 
There is the like unhesitating appeal to the calculus of 
pleasure and pain as the indefeasible ground of action and 
solvent of perplexities, and there is the like readiness to 
reduce all phenomena to terms of a “ normal,” or “nat-— 
ural,” scheme of life constructed on the basis of this he- 
donistic calculus. Even in the ready recourse to “con-~ 
jectural history,” to use Steuart’s phrase, Mr. Clark’s. 
work is at one with both the early classical and the late © 
(Jevons-Austrian) marginal-utility school. It has the 
virtues of both, coupled with the graver shortcomings of - 
both. But, as his view exceeds theirs in breadth and gen- 
erosity, so his system of theory is a more competent ex- — 
pression of current economic science than what is offered © 
by the spokesmen of the Jevons-Austrian wing. It is as 
such, as a competent and consistent system of current 
economic theory, that it is here intended to discuss Mr. © 
Clark’s work, not as a body of doctrines peculiar to Mr. — 
Clark or divergent from the main current. 


Since hedonism came to rule economic science, the sci- — 
ence has been in the main a theory of distribution,— dis- 
tribution of ownership and of income. This is true © 
both of the classical school and of those theorists who — 
have taken an attitude of ostensible antagonism to the — 
classical school. The exceptions to the rule are late and ~ 
comparatively few, and they are not found among the © 
economists who accept the hedonistic postulate as their — 
point of departure. And, consistently with the spirit of 
hedonism, this theory of distribution has centered about 


Professor Clark’s Economics 183 


a doctrine of exchange value (or price) and has worked 
out its scheme of (normal) distribution in terms of (nor- 
mal) price. The normal economic community, upon 
which theoretical interest has converged, is a business 
community, which centers about the market, and whose 
scheme of life is a scheme of profit and loss. Even when 
some considerable attention is ostensibly devoted to 
theories of consumption and production, in these systems 
of doctrine the theories are constructed in terms of own- 
ership, price, and acquisition, and so reduce themselves 
in substance to doctrines of distributive acquisition. In 
this respect Mr. Clark’s work is true to the received 
canons. The “ Essentials of Economic Theory” are the 
essentials of the hedonistic theory of distribution, with 
sundry reflections on related topics. The scope of Mr. 
Clark’s economics, indeed, is even more closely limited by 
concepts of distribution than many others, since he per- 
sistently analyses production in terms of value, and value 
is a concept of distribution. 


As Mr. Clark justly observes (p. 4), “ The primitive 
and general facts concerning industry . . . need to be 
known before the social facts can profitably be studied.” 
In these early pages of the treatise, as in other works of 
its class, there is repeated reference to that more primi- 
tive and simple scheme of economic life out of which the 
modern complex scheme has developed, and it is repeat- 
edly indicated that in order to an understanding of the 
play of forces in the more advanced stages of economic 
development and complication, it is necessary to appre- 
hend these forces in their unsophisticated form as they 
work out in the simple scheme prevalent on the plane of 


4 See, e2.g., J. S. Mill, Political Economy, Book I; Marshall, 
Principles of Economics, Vol. 1, Books II-V. 


184 » Professor Clark’s Economics 


primitive life. Indeed, to a reader not well acquainted 
with Mr. Clark’s scope and method of economic theoris-— 
ing, these early pages would suggest that he is preparing 
for something in the way of a genetic study,— a study of — 
economic institutions approached from the side of thei 
origins. It looks as if the intended line of approach 


forces are at work in the primitive economic community, — 
and then trace the cumulative growth and complication of — 
these factors as they presently take form in the institu-— 
tions of a later phase of the development. Such, how= 
ever, is not Mr. Clark’s intention. The effect of his re-— 
course to “ primitive life” is simply to throw into the 
foreground, in a highly unreal perspective, those features 
which lend themselves to interpretation in terms of the 
normalised competitive system. The best excuse that can 
be offered for these excursions into “ primitive life” is 
that they have substantially nothing to do with the main 
argument of the book, being of the nature of harmless ang 
graceful misinformation. 
In the primitive economic situation — that is to say, in 
savagery and the lower barbarism —there is, of course, 
o “solitary hunter,” living either in a cave or otherwise, 
and there is no man who “ makes by his own labor all the 
goods that he uses,” etc. It is, in effect, a highly mere 
tricious misrepresentation to speak in this connection of 
“the economy of a man who works only for himself,” and 
say that “ the inherent productive power of labor and cap- 
ital is of vital concern to him,” because such a presentation 
of the matter overlooks the main facts in the case in orde 
to put the emphasis on a feature which is of negligible 
consequence. There is no reasonable doubt but that, at 
least since mankind reached the human plane, the eco 


Professor Clark’s Economics 185 


nomic unit has been not a “ solitary hunter,” but a com- 
munity of some kind; in which, by the way, women seem 
in the early stages to have been the most consequential 
factor instead of the man who works for himself. The 
“capital” possessed by such a community —as, e.g., a 
band of California “ Digger” Indians — was a negligible 
quantity, more valuable to a collector of curios than to 
any one else, and the loss of which to the “ Digger” 
squaws would mean very little. What was of “ vital con- 
cern” to them, indeed, what the life of the group de- 
pended on absolutely, was the accumulated wisdom of the 
squaws, the technology of their economic situation.> The 
loss of the basket, digging-stick, and mortar, simply as 
physical objects, would have signified little, but the con- 
ceivable loss of the squaw’s knowledge of the soil and 
seasons, of food and fiber plants, and of mechanical expe- 
dients, would have meant the present dispersal and starva- 
tion of the community. 
This may seem like taking Mr. Clark to task for an 
inconsequential gap in his general information on Digger 
Indians, Eskimos, and palzolithic society at large. But 
the point raised is not of negligible consequence for eco- 
“nomic theory, particularly not for any theory of “ eco- 
“nomic dynamics ” that turns in great part about questions 
‘of capital and its uses at different stages of economic 
development. In the primitive culture the quantity and 
‘the value of mechanical appliances is relatively slight ; and 
‘whether the group is actually possessed of more or less 
of such appliances at a given time is not a question of 
‘first-rate importance. The loss of these objects — tan- 
gible assets— would entail a transient inconvenience. 
But the accumulated, habitual knowledge of the ways and 


_®Cf., e.g., such an account as Barrows, Ethno-botany of the 
Coahuilla Indians. 


186 Professor Clark’s Economics 


means involved in the production and use of these appli- 
ances is the outcome of long experience and experimenta- 
tion; and, given this body of commonplace technological 
information, the acquisition and employment of the suit- 
able apparatus is easily arranged. The great body of 
commonplace knowledge made use of in industry is the 
product and heritage of the group. In its essentials it is 
known by common notoriety, and the “capital goods . 
needed for putting this commonplace technological knowl 
edge to use are a slight matter,— practically within the 
reach of every one. Under these circumstances the own- 
ership of “ capital-goods” has no great significance, and, 
as a practical fact, interest and wages are unknown, and 
the “earning power of capital” is not seen to be “ gov: 
erned by a specific power of productivity which resides i 
capital-goods.” But the situation changes, presently, by 
what is called an advance “in the industrial arts.” The 
“ capital” required to put the commonplace knowledge to 
effect grows larger, and so its acquisition becomes an in- 
creasingly difficult matter. Through “ difficulty of attain- 
ment ” in adequate quantities, the apparatus and its own- 
ership become a matter of consequence; increasingly so, 
until presently the equipment required for an effective 
pursuit of industry comes to be greater than the common 
man can hope to acquire in a lifetime. The commonplace 
knowledge of ways and means, the accumulated experi- 
ence of mankind, is still transmitted in and by the body of 
the community at large; but, for practical purposes, th 
advanced “ state of the industrial arts” has enabled the 
owners of goods to corner the wisdom of the ancients 
and the accumulated experience of the race. He 
“capital,” as it stands at that phase of the institution’ 
growth contemplated by Mr. Clark. 


Professor Clark’s Economics 187 


once called, “the obvious and simple system of natural 
liberty,” is accordingly a phase of the development of the 
institution of capital; and its claim to immutable dominion 
is evidently as good as the like claim of any other phase 
of cultural growth. The equity, or “natural justice,” 
claimed for it is evidently just and equitable only in so far 
as the conventions of ownership on which it rests continue 
to be a secure integral part of the institutional furniture 
of the community ; that is to say, so long as these conven- 
tions are part and parcel of the habits of thought of the 
community; that is to say, so long as these things are 
currently held to be just and equitable. This normalised 
present, or “natural,” state of Mr. Clark, is, as near as 
may be, Senior’s “ Natural State of Man,”— the hypo- 
thetically perfect competitive system; and economic the- 
ory consists in the definition and classification of the phe- 
nomena of economic life in terms of this hypothetical 
competitive system. 

Taken by itself, Mr. Clark’s dealing with the past de- 
velopment might be passed over with slight comment, 
except for its negative significance, since it has no theo- 
retical connection with the present, or even with the 
“natural” state in which the phenomena of economic 
life are assumed to arrange themselves in a stable, normal 
scheme. But his dealings with the future, and with the 
present in so far as the present situation is conceived to 
comprise “ dynamic ” factors, is of substantially the same 


kind. With Senior’s “ natural state of man” as the base- 


line of normality in things economic, questions of present 
and future development are treated as questions of de- 
parture from the normal, aberrations and excesses which 
the theory does not aim even to account for. What is 
offered in place of theoretical inquiry when these “ posi- 
tive perversions of the natural forces themselves ” are 


188 Professor Clark’s Economics 


taken up (e.g., in chapters xxii—xxix.) is an exposition 
of the corrections that must be made to bring the situation 
back to the normal static state, and solicitous advice as to” 
what measures are to be taken with a view to this benefi- 
cent end. The problem presented to Mr. Clark by the 
current phenomena of economic development is: how can 
it be stopped? or, failing that, how can it be guided and 
minimised? Nowhere is there a sustained inquiry into 
the dynamic character of the changes that have brought 
the present (deplorable) situation to pass, nor into the 
nature and trend of the forces at work in the develop- 
ment that is going forward in this situation. None of 
this is covered by Mr. Clark’s use of the word “ dynamic.” 
All that it covers in the way of theory (chapters xii— 
xxi.) is a speculative inquiry as to how the equilibriu 
reéstablished itself when one or more of the quantities in- 
volved increases or decreases. Other than quantitive 
changes are not noticed, except as provocations to homi 
letic discourse. Not even the causes and the scope of 
the quantitive changes that may take place in the variables 
are allowed to fall within the scope of the theory of 
economic dynamics. 

So much of the volume, then, and of the system of do 
trines of which the volume is an exposition, as is com- 
prised in the later eight chapters (pp. 372-554), is af 
exposition of grievances and remedies, with only sporadic 
intrusions of theoretical matter, and does not properly 
constitute a part of the theory, whether static or dynamic. 
There is no intention here to take exception to Mr. Clark’s 
outspoken attitude of disapproval toward certain features 
of the current business situation or to quarrel with t e 
remedial measures which he thinks proper and necessary. 
This phase of his work is spoken of here rather to call 
attention to the temperate but uncompromising tone of 


Professor Clark’s Economics 189 


Mr. Clark’s writings as a spokesman for the competitive 
system, considered as an element in the Order of Nature, 
and to note the fact that this is not economic theory.® 
The theoretical section specifically scheduled as Eco- 
nomic Dynamics (chapters xii—xxi.), on the other hand, 
is properly to be included under the caption of Statics. 
As already remarked above, it presents a theory of equi- 
librium between variables. Mr. Clark is, indeed, barred 
out by his premises from any but a statical development of 
theory. To realise the substantially statical character of 
his Dynamics, it is only necessary to turn to his chapter 
xii. (Economic Dynamics). “A highly dynamic condi- 
tion, then, is one in which the economic organism changes 
rapidly and yet, at any time in the course of its changes, 
is relatively near to a certain static model” (p. 196). 
“The actual shape of society at any one time is not the 
static model of that time; but it tends to conform to it; 
and in a very dynamic society is more nearly like it than 
it would be in one in which the forces of change are less 
active” (p.197). The more “ dynamic” the society, the 
nearer it is to the static model ; until in an ideally dynamic 
society, with a frictionless competitive system, to use Mr. 
Clark’s figure, the static state would be attained, except 


6 What would be the scientific rating of the work of a botanist 
who should spend his energy in devising ways and means to neu- 
tralize the ecological variability of plants, or of a physiologist 
who conceived it the end of his scientific endeavors to rehabili- 
tate the vermiform appendix or the pineal eye, or to denounce 
and penalize the imitative coloring of the Viceroy butterfly? 
What scientific interest would attach to the matter if Mr. Loeb, 

 @g., should devote a few score pages to canvassing the moral 
responsibilities incurred by him in his parental relation to his 
_ parthenogenetically developed sea-urchin eggs? 

Those phenomena which Mr. Clark characterizes as “ positive 
perversions” may be distasteful and troublesome, perhaps, but 
“the economic necessity of doing what is legally difficult” is not 
| of the “essentials of theory.” 


‘ 


190 Professor Clark’s Economics 


for an increase in size,— that is to say, the ideally perfect 
“dynamic” state would coincide with the “ static ” state. 
Mr. Clark’s conception of a dynamic state reduces itself 
to a conception of an imperfectly static state, but in such 
a sense that the more highly and truly “ dynamic” condi-— 
tion is thereby the nearer to a static condition. Neither 
the static nor the dynamic state, in Mr. Clark’s view, it 
should be remarked, is a state of quiescence. Both are 
states of more or less intense activity, the essential differ- 
ence being that in the static state the activity goes on in 
perfection, without lag, leak, or friction; the movement 
of parts being so perfect as not to disturb the equilibrium.. 
The static state is the more “ dynamic” of the two. The 
“dynamic ” condition is essentially a deranged static con- 
dition: whereas the static state is the absolute perfect, 
“natural” taxonomic norm of competitive life. This 
dynamic-static state may vary in respect of the magni- 
tude of the several factors which hold one another in 
equilibrium, but these are none other than quantitive vari 
ations. The changes which Mr. Clark discusses under the 
head of dynamics are all of this character,— changes in 
absolute or relative magnitude of the several factors com-_ 
prised in the equation. 


But, not to quarrel with Mr. Clark’s use of the terms 
“static” and “ dynamic,” it is in place to inquire into the 
merits of this class of economic science apart from any 
adventitious shortcomings. For such an inquiry Mr, 
Clark’s work offers peculiar advantages. It is lucid, con-__ 
cise, and unequivocal, with no temporising euphemisms ‘ 
and no politic affectations of sentiment. Mr. Clark’s 
premises, and therewith the aim of his inquiry, are the 
standard ones of the classical English school (including — 
the Jevons-Austrian wing). This school of economics” 


Professor Clark’s Economics IQI 


stands on the pre-evolutionary ground of normality and 
“natural law,” which the great body of theoretical sci- 
ence occupied in the early nineteenth century. It is like 
the other theoretical sciences that grew out of the ration- 
alistic and humitarian conceptions of the eighteenth cen- 
tury in that its theoretical aim is taxonomy — definition 
and classification — with the purpose of subsuming its 
data under a rational scheme of categories which are pre- 
sumed to make up the Order of Nature. This Order of 
Nature, or realm of Natural Law, is not the actual run 
of material facts, but the facts so interpreted as to meet 
the needs of the taxonomist in point of taste, logical con- 
sistency, and sense of justice. The question of the truth 
and adequacy of the categories is a question as to the con- 
sensus of taste and predilection among the taxonomists ; 
i.¢., they are an expression of trained human nature touch- 
ing the matter of what ought to be. The facts so inter- 
preted make up the “normal,” or “ natural,’ scheme of 
things, with which the theorist has to do. His task is to 
bring facts within the framework of this scheme of “ nat- 
ural” categories. Coupled with this scientific purpose of 
the taxonomic economist is the pragmatic purpose of find- 
ing and advocating the expedient course of policy. On 
this latter head, again, Mr. Clark is true to the animus of 
the school. 

The classical school, including Mr. Clark and his con- 
temporary associates in the science, is hedonistic and 
utilitarian,— hedonistic in its theory and utilitarian in its 
pragmatic ideals and endeavors. The hedonistic postu- 
lates on which this line of economic theory is built up are 
of a statical scope and character, and nothing but statical 
theory (taxonomy) comes out of their development.’ 


7It is a notable fact, that even the genius of Herbert Spencer 
could extract nothing but taxonomy from his hedonistic postu- 


192 Professor Clark’s Economics 


These postulates, and the theorems drawn from them, — 
take account of none but quantitive variations, and quan- 
titive variation alone does not give rise to cumulative 
change, which proceeds on changes in kind. 

Economics of the line represented at its best by Mr. 
Clark has never entered this field of cumulative change. 
It does not approach questions of the class which occupy 
the modern sciences,— that is to say, questions of genesis, 
growth, variation, process (in short, questions of a dy- 
namic import),— but confines its interest to the definition 
and classification of a mechanically limited range of phe- 
nomena. Like other taxonomic sciences, hedonistic eco-- 
nomics does not, and cannot, deal with phenomena of 
growth except so far as growth is taken in the quantita-_ 
tive sense of a variation in magnitude, bulk, mass, num- 
ber, frequency. In its work of taxonomy this economics 
has consistently bound itself, as Mr. Clark does, by dis- 
tinctions of a mechanical, statistical nature, and has 
drawn its categories of classification on those grounds. 
Concretely, it is confined, in substance, to the determina- 
tion of and refinements upon the concepts of land, labor, 
and capital, as handed down by the great economists of 
the classical era, and the correlate concepts of rent, wages, 
interest and profits. Solicitously, with a painfully metic- 
ulous circumspection, the normal, mechanical metes and 
bounds of these several concepts are worked out, the — 
touchstone of the absolute truth aimed at being the hedon- — 
istic calculus. The facts of use and wont are not of th 


lates; e.g., his Social Statics. Spencer is both evolutionist an 
hedonist, but it is only by recourse to other factors, alien to the 
rational hedonistic scheme, such as habit, delusions, use and dis 
use, sporadic variation, environmental forces, that he is able t 
achieve anything in the way of genetic science, since it is only 
by this recourse that he is enabled to enter the field of cumul: 
tive change within which the modern post-Darwinian sciences 
live and move and have their being. ; 


Professor Clark’s Economics 193 


essence of this mechanical refinement. These several 
categories are mutually exclusive categories, mechanically 
speaking. The circumstance that the phenomena covered 
by them are not mechanical facts is not allowed to disturb 
the pursuit of mechanical distinctions among them. 
They nowhere overlap, and at the same time between 
them they cover all the facts with which this economic 
taxonomy is concerned. Indeed, they are in logical con- 
sistency, required to cover them. They are hedonistically 
“natural” categories of such taxonomic force that théir 
elemental lines of cleavage run through the facts of any 
given economic situation, regardless of use and wont, 


even where the situation does not permit these lines of 


cleavage to be seen by men and recognised by use and 
wont ; so that, e.g., a gang of Aleutian Islanders slushing 
about in the wrack and surf with rakes and magical in- 


_ cantations for the capture of shell-fish are held, in point 


of taxonomic reality, to be engaged on a feat of hedonis- 
tic equilibration in rent, wages, and interest. And that 
is all there is to it. Indeed, for economic theory of this 
kind, that is all there is to any economic situation. The 
hedonistic magnitudes vary from one situation to another, 
but, except for variations in the arithmetical details of the 
hedonistic balance, all situations are, in point of economic 
theory, substantially alike.® 

Taking this unfaltering taxonomy on its own recog- 
nisances, let us follow the trail somewhat more into the 


8“The capital-goods have to be taken unit by unit if their 
value for productive purposes is to be rightly gauged. A part of 
a supply of potatoes is traceable to the hoes that dig them... . 
We endeavor simply to ascertain how badly the loss of one hoe 
would affect us or how much good the restoration of it would do 
us. This truth, like the foregoing ones, has a universal applica- 
tion in economics; for primitive men as well as civilized ones 
must estimate the specific productivity of the tools that they use,” 
etc. Page 43. 


194 Professor Clark’s Economics 


arithmetical details, as it leads along the narrow ridge 
of rational calculation, above the tree-tops, on the levels 
of clear sunlight and moonshine. For the purpose in 
hand —to bring out the character of this current eco- — 
nomic science as a working theory of current facts, and 
more particularly “as applied to modern problems of 
industry and public policy ” (title-page)— the sequence 
to be observed in questioning the several sections into 
which the theoretical structure falls is not essential. The 
structure of classical theory is familiar to all students, 
and Mr. Clark’s redaction offers no serious departure © 
from the conventional lines. Such divergence from con- 
ventional lines as may occur is a matter of details, com- 
monly of improvements in detail; and the revisions of de- 
tail do not stand in such an organic relation to one an- 
other, nor do they support and strengthen one another 
in such a manner, as to suggest anything like a revolu- 
tionary trend or a breaking away from the conventional 
lines. : 

So as regards Mr. Clark’s doctrine of Capital. It does 
not differ substantially from the doctrines which are 
gaining currency at the hands of such writers as Mr. 
Fisher or Mr. Fetter; although there are certain formal 
distinctions peculiar to Mr. Clark’s exposition of the 
“ Capital Concept.” But these peculiarities are peculiar- 
ities of the method of arriving at the concept rather than — 
peculiarities substantial to the concept itself. The main 
discussion of the nature of capital is contained in chapter 
ii. (Varieties of Economic Goods). The conception of — 
capital here set forth is of fundamental consequence to 
the system, partly because of the important place assigned — 
capital in this system of theory, partly because of the 
importance which the conception of capital must have in 
any theory that is to deal with problems of the current 


Professor Clark’s Economics 195 


(capitalistic) situation. Several classes of capital-goods 
are enumerated, but it appears that in Mr. Clark’s appre- 
hension — at variance with Mr. Fisher’s view — persons 
are not to be included among the items of capital. It is 
also clear from the run of the argument, though not ex- 
plicitly stated, that only material, tangible, mechanically 
definable articles of wealth go to make up capital. In 
current usage, in the business community, “capital” is a 
pecuniary concept, of course, and is not definable in me- 
chanical terms; but Mr. Clark, true to the hedonistic 
taxonomy, sticks by the test of mechanical demarcation 
and draws the lines of his category on physical 
grounds; whereby it happens that any pecuniary con- 
ception of capital is out of the question. Intangible as- 
sets, or immaterial wealth, have no place in the theory; 
and Mr. Clark is exceptionally subtle and consistent in 
avoiding such modern notions. One gets the impression 
that such a notion as intangible assets is conceived to 
be too chimerical to merit attention, even by way of pro- 
test or refutation. 

Here, as elsewhere in Mr. Clark’s writings, much is 
made of the doctrine that the two facts of “capital” 
and “capital-goods” are conceptually distinct, though 
substantially identical. The two terms cover virtually 
the same facts as would be covered by the terms “ pecuni- 
ary capital” and “industrial equipment.” They are for 
all ordinary purposes coincident with Mr. Fisher’s terms, 
“capital value ” and “ capital,” although Mr. Clark might 
enter a technical protest against identifying his categories 
with those employed by Mr. Fisher.® “Capital is this 
permanent fund of productive goods, the identity of 
whose component elements is forever changing. Capital- 


® Cf. a criticism of Mr. Fisher’s conception in the Political 
Science Quarterly for February, 1908. 


196 Professor Clark’s Economics 


goods are the shifting component parts of this permanent 
aggregate” (p. 29). Mr. Clark admits (pp. 29-33) that 
capital is colloquially spoken and thought of in terms of 
value, but he insists that in point of substantial fact the 
working concept of capital is (should be) that of “a fund 
of productive goods,” considered as an “ abiding entity.” 
The phrase itself, ““a fund of productive goods,” is a 
curiously confusing mixture of pecuniary and mechanical 
. terms, though the pecuniary expression, “a fund,” is 
probably to be taken in this connection as a permissible 
metaphor. 

This conception of capital, as a physically “ abiding 
entity ” constituted by the succession of productive goods — 
that make up the industrial equipment, breaks down in 
Mr. Clark’s own use of it when he comes (pp. 37-38) 
to speak of the mobility of capital; that is to say, so soon — 
as he makes use of it. A single illustration of this will 
have to suffice, though there are several points in his 
argument where the frailty of the conception is patent — 
enough. ‘ The transfer of capital from one industry to 
another is a dynamic phenomenon which is later to be — 
considered. What is here important is the fact that it 
is in the main accomplished without entailing transfers 
of capital-goods. An instrument wears itself out in one — 
industry, and instead of being succeeded by a like instru- 
ment in the same industry, it is succeeded by one of a — 
different kind which is used in a different branch of pro- 
duction ” (p. 38),— illustrated on the preceding page by 
a shifting of investment from a whaling-ship to a cotton- 
mill. In all this it is plain that the “transfer of capital” 
contemplated is a shifting of investment, and that it is, © 
as indeed Mr. Clark indicates, not a matter of the me- 


chanical shifting of physical bodies from one industry 


to the other. To speak of a transfer of “ capital” which 


Professor Clark’s Economics 197 


does not involve a transfer of “ capital-goods ” is a con- 
tradiction of the main position, that “capital” is made 
up of “capital-goods.” The continuum in which the 
“abiding entity” of capital resides is a continuity of 
ownership, not a physical fact. The continuity, in fact, 
is of an immaterial nature, a matter of legal rights, of 
contract, of purchase and sale. Just why this patent 
state of the case is overlooked, as it somewhat elaborately 
is, is not easily seen. But it is plain that, if the concept 
of capital were elaborated from observation of current 
business practice, it would be found that “capital” is a 
pecuniary fact, not a mechanical one; that it is an out- 
come of a valuation, depending immediately on the state 
of mind of the valuers; and that the specific marks of 
capital, by which it is distinguishable from other facts, 
are of an immaterial character. This would, of course, 
lead, directly, to the admission of intangible assets; and 
this, in turn, would upset the law of the “natural” re- 
muneration of labor and capital to which Mr. Clark’s 
argument looks forward from the start. It would also 
bring in the “ unnatural” phenomena of monopoly as a 
normal outgrowth of business enterprise. 

There is a further logical discrepancy avoided by re- 
sorting to the alleged facts of primitive industry, when 
there was no capital, for the elements out of which to 
construct a capital concept, instead of going to the cur- 
rent business situation. In a _hedonistic-utilitarian 
scheme of economic doctrine, such as Mr. Clark’s, only 
physically productive agencies can be admitted as efficient 
factors in production or as legitimate claimants to a 
share in distribution. Hence capital, one of the prime 
factors in production and the central claimant in the cur- 
rent scheme of distribution, must be defined in physical 
terms and delimited by mechanical distinctions. This is 


198 Professor Clark’s Economics 


necessary for reasons which appear in the succeeding 
chapter, on The Measure of Consumers’ Wealth. 

On the same page (38), and elsewhere, it is remarked 
that “business disasters” destroy capital in part. The 
destruction in question is a matter of values; that is to 
say, a lowering of valuation, not in any appreciable de- 
gree a destruction of material goods. Taken as a phys- 
ical aggregate, capital does not appreciably decrease 
through business disasters, but, taken as a fact of owner- 
ship and counted in standard units of value, it decreases; 
there is a destruction of values and a shifting of owner- 


ship, a loss of ownership perhaps; but these are pecu- ~ 


niary phenomena, of an immaterial character, and so do 
not directly affect the material aggregate of the industrial 
equipment. Similarly, the discussion (pp. 301-314) of 
how changes of method, as, e.g., labor-saving devices, 
“liberate capital,” and at times “ destroy ” capital, is in- 
telligible only on the admission that “ capital” here is a 
matter of values owned by investors and is not employed 
as a synonym for industrial appliances. The appli- 
ances in question are neither liberated nor destroyed in 
the changes contemplated. And it will not do to say 
that the aggregate of “productive goods” suffers a 
diminution by a substitution of devices which increases 
its aggregate productiveness, as is implied, e.g., by the 
passage on page 307,°° if Mr. Clark’s definition of capital 


10“ The machine itself is often a hopeless specialist. It can 
do one minute thing and that only, and when a new and better 
device appears for doing that one thing, the machine has to go, 
and not to some new employment, but to the junk heap. There is 
thus taking place a considerable waste of capital in consequence 
of mechanical and other progress.” “Indeed, a quick throwing 


away of instruments which have barely begun to do their work is — 


often the secret of the success of an enterprising manager, but it 
entails a destruction of capital.” 


a 


Professor Clark’s Economics 199 


is strictly adhered to. This very singular passage (pp. 
306-311, under the captions, Hardships entailed on Cap- 
italists by Progress, and the Offset for Capital destroyed 
by Changes of Method) implies that the aggregate of 
appliances of production is decreased by a change which 
increases the aggregate of these articles in that respect 
(productivity) by virtue of which they are counted in 
the aggregate. The argument will hold good if “ pro- 
ductive goods” are rated by bulk, weight, number, or 
some such irrelevant test, instead of by their productivity 
or by their consequent capitalised value. On such a 
showing it should be proper to say that the polishing of 
plowshares before they are sent out from the factory 
diminishes the amount of capital embodied in plowshares 
by as much as the weight or bulk of the waste material 
removed from the shares in polishing them. 

Several things may be said of the facts discussed in 
this passage. There is, presumably, a decrease, in bulk, 
weight, or number, of the appliances that make up the 
industrial equipment at the time when such a technolog- 
ical change as is contemplated takes place. This change, 
presumably, increases the productive efficiency of the 
equipment as a whole, and so may be said without hesi- 
tation to increase the equipment as a factor of produc- 
tion, while it may decrease it, considered as a mechanical 
magnitude. The owners of the obsolete or obsolescent 
appliances presumably suffer a diminution of their cap- 
ital, whether they discard the obsolete appliances or not. 
The owners of the new appliances, or rather those who 
own and are able to capitalise the new technological ex- 
pedients, presumably gain a corresponding advantage, 
which may take the form of an increase of the effective 
capitalisation of their outfit, as would then be shown by 
an increased market value of their plant. The largest 


200 Professor Clark’s Economics 


theoretical outcome of the supposed changes, for an 
economist not bound by Mr. Clark’s conception of capital, 
should be the generalisation that industrial capital — 
capital considered as a productive agent—dis substan- 
tially a capitalisation of technological expedients, and 
that a given capital invested in industrial equipment is 
measured by the portion of technological expedients whose 
usufruct the investment appropriates. It would accord- 
ingly appear that the substantial core of all capital is im- 
material wealth, and that the material objects which are 
formally the subject of the capitalist’s ownership are, by 
comparison, a transient and adventitious matter. But if 
such a view were accepted, even with extreme reserva- 
tions, Mr. Clark’s scheme of the “ natural” distribution © 
of incomes between capital and labor would “go up in 
the air,” as the colloquial phrase has it. It would be ex- 
tremely difficult to determine what share of the value of 
the joint product of capital and labor should, under a 
rule of “natural” equity, go to the capitalist as an equi- 
table return for his monopolisation of a given portion of 
the intangible assets of the community at large. The 
returns actually accruing to him under competitive con- 
ditions would be a measure of the differential advan- 
tage held by him by virtue of his having become legally 
seized of the material contrivances by which the tech- 
nological achievements of the community are put into 
effect. 

Yet, if in this way capital were apprehended as “an 
historical category,’ as Rodbertus would say, there is 
at least the comfort in it all that it should leave a free 


“ 


11 The position of the laborer and his wages, in this light, 
would not be substantially different from that of the capitalis: 
and his interest. Labor is no more possible, as a fact of indus 
try, without the community’s accumulated technological knowl- 
edge than is the use of “ productive goods.” 


Professor Clark’s Economics 201 


field for Mr. Clark’s measures of repression as applied 
to the discretionary management of capital by the mak- 
ers of trusts. And yet, again, this comforting reflection 
is coupled with the ugly accompaniment that by the same 
move the field would be left equally free of moral obstruc- 
tions to the extreme proposals of the socialists. A safe 
and sane course for the quietist in these premises should 
apparently be to discard the equivocal doctrines of the 
passage (pp. 306-311) from which this train of questions 
arises, and hold fast to the received dogma, however un- 
workable, that “ capital” is a congeries of physical objects 
with no ramifications or complications of an immaterial 
kind, and to avoid all recourse to the concept of value, 
Or price, in discussing matters of modern business. 


The center of interest and of theoretical force and va- 
lidity in Mr. Clark’s work is his law of “ natural ” distri- 
bution. Upon this law hangs very much of the rest, 
if not substantially the whole structure of theory. To 
this law of distribution the earlier portions of the theo- 
retical development look forward, and this the succeed- 
ing portions of the treatise take as their point of de- 
parture. The law of “natural” distribution says that 
any productive agent “ naturally ” gets what it produces. 
Under ideally free competitive conditions — such as pre- — 
vail in the “ static ” state, and to which the current situa- 
tion approximates — each unit of each productive factor 
unavoidably gets the amount of wealth which it creates, 
—its “virtual product,” as it is sometimes expressed. 
This law rests, for its theoretical validity, on the doctrine 
of “final productivity,” set forth in full in the Distribu- 
tion of Wealth, and more concisely in the Essentials 12 — 


a Cf. Distribution of Wealth, chaps. xii, xiii, vii, viii; Essen- 
tials, chaps. v—x. 


202 Professor Clark’s Economics 


“one of those universal principles which govern economic 
life in all its stages of evolution.” 8 

In combination with a given amount of capital, it is 
held, each succeeding unit of added labor adds a less than n 
proportionate increment to the product. The total prod- 
uct created by the labor so engaged is at the same time 
the distributive share received by such labor as wages; 
and it equals the increment of product added by the 
“final” unit of labor, multiplied by the number of such 
units engaged. The law of “natural” interest is the 
same as this law of wages, with a change of terms. The 
product of each unit of labor or capital being measured 
by the product of the “final” unit, each gets the amount 
of its own product. 

In all of this the argument runs in terms of value; at 
it is Mr. Clark’s view, backed by an elaborate exposition 
of the grounds of his contention," that the use of these 
terms of value is merely a matter of convenience for the 
argument, and that the conclusions so reached — the 
equality so established between productivity and remu- 
neration — may be converted to terms of goods, or “ ef 
fective utility,” without abating their validity. 

Without recourse to some such common denominator 
as value the outcome of the argument would, as Mr 
Clark indicates, be something resembling the Ricardian 
law of differential rent instead of a law drawn in homo- 
geneous terms of “ final productivity”; and the law of 
“natural ” distribution would then, at the best, fall shor 
of a general formula. But the recourse to terms of value 
does not, as Mr. Clark recognises, dispose of the question 
without more ado. It smooths the way for the argument | 
but, unaided, it leaves it nugatory. According to Hu- 

13 Essentials, p. 158. 

14 Distribution, chap. xxiv. 


i 


: 


i 
i 


|| 


Professor Clark’s Economics 203 


dibras, “ The value of a thing Is just as much as it will 
bring,” and the later refinements on the theory of value 
have not set aside this dictum of the ancient authority. 
It answers no pertinent question of equity to say that 
the wages paid for labor are as much as it will bring. 
And Mr. Clark’s chapter (xxiv.) on “The Unit for 
Measuring Industrial Agents and their Products” is 
designed to show how this tautological statement in terms 
of market value converts itself, under competitive condi- 
tions, into a competent formula of distributive justice. 
It does not conduce to intelligibility to say that the wages 
of labor are just and fair because they are all that is paid 
to labor as wages. What further value Mr. Clark’s ex- 
tended discussion of this matter may have will lie in his 
exposition of how competition converts the proposition 
that “‘ the value of a thing is just as much as it will bring ” 
into the proposition that “the market rate of wages (or 
interest) gives to labor (or capital) the full product of 
labor (or capital).” 

In following up the theory at this critical point, it is 
necessary to resort to the fuller statement of the Distri- 
bution of Wealth, the point being not so adequately cov- 
ered in the Essentials. Consistently hedonistic, Mr. Clark 
recognises that his law of natural justice must be reduced 
to elementary hedonistic terms, if it is to make good its 
claim to stand as a fundamental principle of theory. In 
hedonistic theory, production of course means the pro- 
duction of utilities, and utility is of course utility to 
the consumer.1° A product is such by virtue of and to 
the amount of the utility which it has for a consumer. 
This utility of the goods is measured, as value, by the 
sacrifice (disutility) which the consumer is willing to 


15 Chap. xxiv. 
16 Essentials, p. 40. 


204 Professor Clark’s Economics 


undergo in order to get the utility which the consumption 
of the goods yields him. The unit and measure of pro- — 
ductive labor is in the last analysis also a unit of dis- 
utility ; but it is disutility to the productive laborer, not to 
the consumer. The balance which establishes itself un- 
der competitive conditions is a compound balance, being 
a balance between the utility of the goods to the con- 
sumer and the disutility (cost) which he is willing to 
undergo for it, on the one hand, and, on the other hand, . 
a balance between the disutility of the unit of labor and 
the utility for which the laborer is willing to undergo 
this disutility. It is evident, and admitted, that there can 
be no balance, and no commensurability, between the la- — 
borer’s disutility (pain) in producing the goods and the 
consumer’s utility (pleasure) in consuming them, inas- 
much as these two hedonistic phenomena lie each within 
the consciousness of a distinct person. There is, in fact, 
no continuity of nervous tissue over the interval between 
consumer and producer, and a direct comparison, equilib- 
rium, equality, or discrepancy in respect of pleasure and ~ 
pain can, of course, not be sought except within each 
self-balanced individual complex of nervous tissue.” — 
The wages of labor (i.e., the utility of the goods received ) 
by the laborer) is not equal to the disutility undergone 
by him, except in the sense that he is competitively will- | 
ing to accept it; nor are these wages equal to the utility 
got by the consumer of the goods, except in the sense 
} 


17 Among modern economic hedonists, including Mr. Clark, 
there stands over from the better days of the order of nature a 
presumption, disavowed, but often decisive, that the sensational 
response to the like mechanical impact of the stimulating body is 
the same in different individuals. But, while this presumption 
stands ever in the background, and helps to many important con- — 
clusions, as in the case under discussion, few modern hedonists q 
would question the statement in the text. 


Professor Clark’s Economics 205 


that he is competitively willing to pay them. This point 
is covered by the current diagrammatic arguments of 
marginal-utility theory as to the determination of com- 
petitive prices. 

But, while the wages are not equal to or directly com- 
parable with the disutility of the productive labor en- 
gaged, they are, in Mr. Clark’s view, equal to the “ pro- 
ductive efficiency” of that labor. “Efficiency in a 
worker is, in reality, power to draw out labor on the part 
of society. It is capacity to offer that for which society 
will work in return.” By the mediation of market price, 
under competitive conditions, it is held, the laborer gets, 
in his wages, a valid claim on the labor of other men 
(society) as large as they are competitively willing to 
allow him for the services for which he is paid his wages. 
The equitable balance between work and pay contem- 
plated by the “natural” law is a balance between wages 
and “ efficiency,” as above defined; that is to say, between 
the wages of labor and the capacity of labor to get wages. 
So far, the whole matter might evidently have been left 
as Bastiat left it. It amounts to saying that the laborer 
gets what he is willing to accept and the consumers give 
what they are willing to pay. And this is true, of course, 
whether competition prevails or not. 

What makes this arrangement just and right under 
competitive conditions, in Mr. Clark’s view, lies in his 
further doctrine that under such conditions of unob- 
structed competition the prices of goods, and therefore 
the wages of labor, are determined, within the scope of 
the given market, by a quasi-consensus of all the parties 
in interest. There is of course no formal consensus, but 
_ what there is of the kind is implied in the fact that bar- 
gains are made, and this is taken as an appraisement by 


18 Distribution, p. 394. 


206 Professor Clark’s Economics 


“society” at large. The (quasi-) consensus of buyers is 
held to embody the righteous (quasi-) appraisement of 
society in the premises, and the resulting rate of wages is 
therefore a (quasi-) just return to the laborer.° “ Each 
man accordingly is paid an amount that equals the total 
product that he personally creates.” ° If competitive 
conditions are in any degree disturbed, the equitable bal- 
ance of prices and wages is disturbed by that much. All 
this holds true for the interest of capital, with a change of 
terms. 

The equity and binding force of this finding is evidently 


bound up with that common-sense presumption on which . 


it rests; namely, that it is right and good that all men 
should get what they can without force or fraud and 
without disturbing existing property relations. It springs 
from this presumption, and, whether in point of equity 
or of expediency, it rises no higher than its source. It 
does not touch questions of equity beyond this, nor does 
it touch questions of the expediency or probable advent 
of any contemplated change in the existing conventions 
as to rights of ownership and initiative. It affords a basis 
for those who believe in the old order — without which 
belief this whole structure of opinions collapses — to 
argue questions of wages and profits in a manner con- 
vincing to themselves, and to confirm in the faith those 
who already believe in the old order. But it is not easy 
to see that some hundreds of pages of apparatus should 


be required to find one’s way back to these time-worn — 


commonplaces of Manchester. 


In effect, this law of “‘ natural” distribution says that — 


19JIn Mr. Clark’s discussion, elsewhere, the “quasi ’’-character 
of the productive share of the laborer is indicated by saying that 
it is the product “imputed” or “imputable” to him. 

20 Essentials, p. 92. Et si sensus deficit, ad firmandum cor 
sincerum sola fides sufficit. 


NI 0 5 DD BER 


Professor Clark’s Economics 207 


whatever men acquire without force or fraud under 
competitive conditions is their equitable due, no more 
and no less, assuming that the competitive system, with 
its underlying institution of ownership, is equitable and 
“natural.” In point of economic theory the law appears 
on examination to be of slight consequence, but it merits 
further attention for the gravity of its purport. It is 
offered as a definitive law of equitable distribution com- 
prised in a system of hedonistic economics which is in 
the main a theory of distributive acquisition only. It is 
worth while to compare the law with its setting, with a 
view to seeing how its broad declarations of economic 
justice shows up in contrast with the elements out of 
which it is constructed and among which it lies. 
Among the notable chapters of the Essentials is one 
(vi.) on Value and its Relation to Different Incomes, 
which is not only a very substantial section of Mr. Clark’s 
economic theory, but at the same time a type of the 
achievements of the latter-day hedonistic school. Certain 
features of this chapter alone can be taken up here. The 
rest may be equally worthy the student’s attention, but 
it is the intention here not to go into the general sub- 
stance of the theory of marginal utility and value, to 
which the chapter is devoted, but to confine attention to 
such elements of it as bear somewhat directly on the 
question of equitable distribution already spoken of. 
Among these latter is the doctrine of the “ consumer’s 
surplus,’— virtually the same as what is spoken of by 
other writers as “‘ consumer’s rent.” ®* “ Consumer’s sur- 
plus” is the surplus of utility (pleasure) derived by the 
consumer of goods above the (pain) cost of the goods to 
him. This is held to be a very generally prevalent phe- 
nomenon. Indeed, it is held to be all but universally 


21 See pp. 102-113; also p. 172, note. 


208 Professor Clark’s Economics 


present in the field of consumption. It might, in fact, be — 
effectively argued that even Mr. Clark’s admitted excep- 
tion ?* is very doubtfully to be allowed, on his own show- 
ing. Correlated with this element of utility on the con- 
sumer’s side is a similar volume of disutility on the pro- 
ducer’s side, which may be called “ producer’s abate- 
ment,” 6r “ producer’s rent”: it is the amount of dis- 
utility by which the disutility-cost of a given article to 
any given producer (laborer) falls short of (or con- 
ceivably exceeds) the disutility incurred by the marginal 
producer. Marginal buyers or consumers and marginal 
sellers or producers are relatively few: the great body 
on both sides come in for something in the way of a 
“surplus” of utility or disutility. 

All this bears on the law of “ natural” wages and in- 
terest as follows, taking that law of just remuneration 
at Mr. Clark’s rating of it. The law works out through 
the mediation of price. Price is determined, competi- 
tively, by marginal producers or sellers and marginal 
consumers or purchasers: the latter alone on the one 
side get the precise price-equivalent of the disutility in- 
curred by them, and the latter alone on the other side 
pay the full price-equivalent of the utilities derived by 
them from the goods purchased.?? Hence the competi- 
tive price — covering competitive wages and interest — — 
does not reflect the consensus of all parties concerned as — 
to the “effective utility” of the goods, on the one hand, 
or as to their effective (disutility) cost, on the other hand. 
It reflects instead, if anything of this kind, the valuations 
which the marginal unfortunates on each side concede 
under stress of competition; and it leaves on each side — 


of the bargain relation an uncovered “surplus,” which 


22“ The cheapest and poorest grades of articles.” Page 113. 
23 See p. 113. 


Professor Clark’s Economics 209 


marks the (variable) interval by which price fails to 
cover “effective utility.” The excess utility —and the 
conceivable excess cost — does not appear in the market 
transactions that mediate between consumer and pro- 
ducer.2* In the balance, therefore, which establishes 
itself in terms of value between the social utility of the 
product and the remuneration of the producer’s “ effi- 
ciency,” the margin of utility represented by the aggre- 
gate “consumer’s surplus” and like elements is not 
accounted for. It follows, when the argument is in 
this way reduced to its hedonistic elements, that no man 
“is paid an amount that equals the amount of the total 
product that he personally creates.” 

Supposing the marginal-utility (final-utility) theories 
of objective value to be true, there is no consensus, actual 
or constructive, as to the “ effective utility ” of the goods 
produced: there is no “social” decision in the case be- 
yond what may be implied in the readiness of buyers to 
profit as much as may be by the necessities of the marginal 
buyer and seller. It appears that there is warrant, within 


these premises, for the formula: Remuneration > than 


Product. Only by an infinitesimal chance would it hold 
true in any given case that, hedonistically, Remunera- 
tion = Product; and, if it should ever happen to be true, . 
there would be no finding it out. 

The (hedonistic) discrepancy which so appears be- 
tween remuneration and product affects both wages and 
interest in the same manner, but there is some (hedon- 
istic) ground in Mr. Clark’s doctrines for holding that the 
discrepancy does not strike both in the same degree. 


24’The disappearance, and the method of disapearance, of such 
elements of differential utility and disutility occupies a very 
important place in all marginal-utility (“final-utility”’) theories 
of market value, or “objective value.” 


210 Professor Clark’s Economics 


There is indeed no warrant for holding that there is any- 
thing like an equable distribution of this discrepancy 
among the several industries or the several industrial 
concerns ; but there appears to be some warrant, on Mr. 
Clark’s argument, for thinking that the discrepancy is 


perhaps slighter in those branches of industry which pro- 


duce the prime necessaries of life.2° This point of doc- 
trine throws also a faint (metaphysical) light on a, 
possibly generic, discrepancy between the remuneration 
of capitalists and that of laborers: the latter are, rela- 
tively, more addicted to consuming the necessaries of life, 
and it may be that they thereby gain less in the way of 
a consumer’s surplus. 

All the analysis and reasoning here set forth has an air 
of undue tenuity; but in extenuation of this fault it 
should be noted that this reasoning is made up of such 
matter as goes to make up the theory under review, and 
the fault, therefore, is not to be charged to the critic. 
The manner of argument required to meet this theory of 
the “ natural law of final productivity ” on its own ground 
is itself a sufficiently tedious proof of the futility of the 
whole matter in dispute. Yet it seems necessary to beg 
further indulgence for more of the same kind. As a 
needed excuse, it may be added that what immediately 
follows bears on Mr. Clark’s application of the law of 
“natural distribution” to modern problems of industry 
and public policy, in the matter of curbing monopolies. 


Accepting, again, Mr. Clark’s general postulates — 
the postulates of current hedonistic economics — and ap- 


plying the fundamental concepts, instead of their corol- — 


laries, to his scheme of final productivity, it can be shown 


25 “ Only the simplest and cheapest things that are sold in the 


market at all bring just what they are worth to the buyers.” — 


Page 113. 


i 


Professor Clark’s Economics 211 


to fail on grounds even more tenuous and hedonistically 
more fundamental than those already passed in review. 
In all final-utility (marginal-utility) theory it is of the 
essence of the scheme of things that successive incre- 
ments of a “ good” have progressively less than propor- 
tionate utility. In fact, the coefficient of decrease of util- 
ity is greater than the coefficient of increase of the stock of 
goods. The solitary “first loaf” is exorbitantly useful. 
As more loaves are successively added to the stock, the 
utility of each grows small by degrees and incontinently 
less, until, in the end, the state of the “marginal” or 
“final” loaf is, in respect of utility, shameful to relate. 
So, with a change of phrase, it fares with successive in- 
crements of a given productive factor — labor or capital 
—in Mr. Clark’s scheme of final productivity. And so, 
of course, it also fares with the utility of successive in- 
crements of product created by successively adding unit 
after unit to the complement of a given productive factor 
engaged in the case. If we attend to this matter of final 
productivity in consistently hedonistic terms, a curious 
result appears. 

A larger complement of the productive agent, counted 
by weight and tale, will, it is commonly held, create 
a larger output of goods, counted by weight and tale; * 
but these are not hedonistic terms and should not be 
allowed to cloud the argument. In the hedonistic scheme 
the magnitude of goods, in all the dimensions to be taken 


26Tt is, e.g., Open to serious question whether Mr. Clark’s 
curves of final productivity (pp. 139, 148), showing a declining 
output per unit in response to an increase of one of the com- 
plementary agents of production, will fit the common run of 
industry in case the output be counted by weight and tale. In 
many cases they will, no doubt; in many other cases they will not. 
But this is no criticism of the curves in question, since they do 
not, or at least should not, purport to represent the product in 
such terms, but in terms of utility. 


212 Professor Clark’s Economics 


account of, is measured in terms of utility, which is a 
different matter from weight and tale. It is by virtue of 
their utility that they are “ goods,” not by virtue of their 
physical dimensions, number and the like; and utility 
is a matter of the production of pleasure and the pre- 
vention of pain. MHedonistically speaking, the amount 
of the goods, the magnitude of the output, is the quantity 
of utility derivable from their consumption; and the 
‘utility per unit decreases faster than the number of units 
increases.*7 It follows that in the typical or undifferen- 
tiated case an increase of the number of units beyond a 
certain critical point entails a decrease of the “total ef- 
fective utility ” of the supply.?8 This critical point seems 
ordinarily to be very near the point of departure of the 
curve of declining utility, perhaps it frequently coin- 
cides with the latter. On the curve of declining final 
utility, at any point whose tangent cuts the axis of ordi- 
nates at an angle of less than 45 degrees, an increase of 
the number of units entails a decrease of the “ total effec- 
tive utility of the supply,” *° so that.a gain in physical 


27 To resort to an approximation after the manner of Malthus, 
if the supply of goods be supposed to increase by arithmetical 
progression, their final utility may be said concomitantly to de- 
crease by geometrical progression. 

28 Cf. Essentials, chap. iii, especially pp. 40-41. 

29 The current marginal-utility diagrams are not of much use in 
this connection, because the angle of the tangent with the axis of — 
ordinates, at any point, is largely a matter of the draftsman’s — 
taste. The abscissa and the ordinate do not measure com- 
mensurable units. The units on the abscissa are units of fre- 
quency, while those on the ordinate are units of amplitude; and — 
the greater or less segment of line allowed per unit on either axis — 
is a matter of independently arbitrary choice. Yet the propo- 
sition in the text remains true,— as true as hedonistic propositions — 
commonly are. The magnitude of the angle of the tangent with — 
the axis of ordinates decides whether the total (hedonistic) pro- 
ductivity at a given point in the curve increases or decreases with 
a (mechanical) increase of the productive agent,—no student at 


Professor Clark’s Economics 213 


productivity is a loss as counted in “total effective util- 
ity.” Hedonistically, therefore, the productivity in such 
a case diminishes, not only relatively to the (physical) 
magnitude of the productive agents, but absolutely. This 
critical point, of maximum “total effective utility,” is, if 
the practice of shrewd business men is at all significant, 
commonly somewhat short of the point of maximum 
physical productivity, at least in modern industry and in 
a modern community. 

The “total effective utility” may commonly be in- 
creased by decreasing the output of goods. The “ total 
effective utility” of wages may often be increased by 
decreasing the amount (value) of the wages per man, 
particularly if such a decrease is accompanied by a rise 
in the price of articles to be bought with the wages. 
Hedonistically speaking, it is evident that the point of 
maximum net productivity is the point at which a per- 
fectly shrewd business management of a perfect monopoly 
would limit the supply; and the point of maximum (he- 
donistic) remuneration (wages and interest) is the point 
which such a management would fix on in dealing with 
a wholly free, perfectly competitive supply of labor and 
capital. 

Such a monopolistic state of things, it is true, would 
not answer to Mr. Clark’s ideal. Each man would not be 
“paid an amount that equals the amount of the total 
product that he personally creates,” but he would com- 
monly be paid an amount that (hedonistically, in point 
of “ effective utility ”) exceeds what he personally creates, 
because of the high final utility of what he receives. 


all familiar with marginal-utility arguments will question that 
patent fact. But the angle of the tangent depends on the fancy of 
the draftsman,— no one possessed of the elemental mathematical 
notions will question that equally patent fact. 


214 Professor Clark’s Economics 


This is easily proven. Under the monopolistic conditions 
supposed, the laborers would, it is safe to assume, not be 
fully employed all the time; that is to say, they would be 
willing to work some more in order to get some more 
articles of consumption; that is to say, the articles of con- 
sumption which their wages offer them have so high a 
utility as to afford them a consumer’s surplus,— the 
articles are worth more than they cost: *° Q. E. D. 

The initiated may fairly doubt the soundness of the 
chain of argument by which these heterodox theoretical 


. 


| 
| 
: 


results are derived from Mr. Clark’s hedonistic postulates, — 


more particularly since the adepts of the school, including 
Mr. Clark, are not accustomed to draw conclusions to 
this effect from these premises. Yet the argument pro- 
ceeds according to the rules of marginal-utility permuta- 
tions. In view of this scarcely avoidable doubt, it may 
be permitted, even at the risk of some tedium, to show 
how the facts of every-day life bear out this unexpected 
turn of the law of natural distribution, as briefly traced 
above. The principle involved is well and widely ac- 
cepted. The familiar practical maxim of “ charging 
what the traffic will bear” rests on a principle of this 


kind, and affords one of the readiest practical illustra- 
tions of the working of the hedonistic calculus. The 


principle involved is that a larger aggregate return 
(value) may be had by raising the return per unit to such 
a point as to somewhat curtail the demand. In practice 


it is recognised, in other words, that there is a critical 
point at which the value obtainable per unit, multiplied — 


by the number of units that will be taken off at that price, 


will give the largest net aggregate result (in value to the 


30 A similar line of argument has been followed up by Mr. 


Clark for capital and interest, in a different connection. See 
Essentials, pp. 340-345, 350. 


Professor Clark’s Economics 215 


seller) obtainable under the given conditions. A calculus 
involving the same principle is, of course, the guiding 
consideration in all monopolistic buying and selling; but 
a moment’s reflection will show that it is, in fact, the 
ruling principle in all commercial transactions and, in- 
deed, in all business. The maxim of “ charging what the 
traffic will bear” is only a special formulation of the 
generic principle of business enterprise. Business initia- 
tive, the function of the entrepreneur (business man) is 
comprehended under this principle taken in its most 
general sense.* In business the buyer, it is held by 
the theorists, bids up to the point of greatest obtainable 
advantage to himself under the conditions prevailing, and 
the seller similarly bids down to the point of greatest 
obtainable net aggregate gain. For the trader (business 
man, entrepreneur) doing business in the open (com- 
petitive) market or for the business concern with a par- 
tial or limited monopoly, the critical point above referred 
to is, of course, reached at a lower point on the curve of 
price than would be the case under a perfect and un- 
limited monopoly, such as was supposed above; but the 
principle of charging what the traffic will bear remains 
intact, although the traffic will not bear the same in the 
one case as in the other. 

Now, in the theories based on marginal (or “ final”) 
utility, value is an expression or measure of “ effective 
utility "— or whatever equivalent term may be preferred. 
In operating on values, therefore, under the rule of charg- 
ing what the traffic will bear, the sellers of a monopolised 
supply, e.g., must operate through the valuations of the 
buyers; that is to say, they must influence the final 
utility of the goods or services to such effect that the 


31 Cf, Essentials, pp. 83-90, 118-120. 


216 Professor Clark’s Economics 


“total effective utility” of the limited supply to the 
consumers will be greater than would be the “ total effec- 
tive utility”’ of a larger supply, which is the point in 
question. The emphasis falls still more strongly on this 
illustration of the hedonistic calculus, if it is called to 
mind that in the common run of such limitations of sup- 
ply by a monopolistic business management the manage- 
ment would be able to increase the supply at a progres- 
sively declining cost beyond the critical point by virtue 
of the well-known principle of increasing returns from 
industry. It is also to be added that, since the monopo- 
listic business gets its enhanced return from the margin 
by which the “ total effective utility ” of the limited sup- 
ply exceeds that of a supply not so limited, and since 
there is to be deducted from this margin the costs of 
monopolistic management in addition to other costs, there- 
fore the enhancement of the “ total effective utility ” of | 
the goods to the consumer in the case must be appre-— 
ciably larger than the resulting net gains to the monopoly. ~ 
By a bold metaphor —a metaphor sufficiently bold to 
take it out of the region of legitimate figures of speech — 
the gains that come to enterprising business concerns 
by such monopolistic enhancement of the “ total effective 
utility” of their products are spoken of as “ robbery,” 
“extortion,” “plunder ”; but the theoretical complexion 
of the case should not be overlooked by the hedonistic 
theorist in the heat of outraged sentiment. The monopo- 
list is only pushing the principle of all business enterprise » 
(free competition) to its logical conclusion; and, in point — 
of hedonistic theory, such monopolistic gains are to be 
accounted the “ natural” remuneration of the monopolist — 
for his “ productive” service to the community in en- 
hancing their enjoyment per unit of consumable goods 


Professor Clark’s Economics 217 


to such point as to swell their net aggregate enjoyment 
to a maximum. 

This intricate web of hedonistic calculations might be 
pursued further, with the result of showing that, while 
the consumers of the monopolised supply of goods are 
gainers by virtue of the enhanced “ total effective utility ” 
of the goods, the monopolists who bring about this result 
do so in great part at their own cost, counting cost in 
terms of a reduction of “total effective utility.” By 
injudiciously increasing their own share of goods, they 
lower the marginal and effective utility of their wealth 
to such a point as, probably, to entail a considerable 
(hedonistic) privation in the shrinkage of their enjoyment 
per unit. But it is not the custom of economists, nor 
does Mr. Clark depart from this custom, to dwell on the 
hardships of the monopolists. This much may be added, 
however, that this hedonistically consistent exposition of 
the “natural law of final productivity ” shows it to be 
“one of those universal principles which govern economic 
life in all its stages of evolution,” even when that evolu- 
tion enters the phase of monopolistic business enterprise, 
— granting always the sufficiency of the hedonistic postu- 
lates from which the law is derived. Further, the con- 
siderations reviewed above go to show that, on two counts, 
Mr. Clark’s crusade against monopoly in the later portion 
of his treatise is out of touch with the larger theoretical 
speculations of the earlier portions: (a) it runs counter 
to the hedonistic law of “natural” distribution; and (b) 
the monopolistic business against which Mr. Clark speaks 
is but the higher and more perfect development of that 
competitive business enterprise which he wishes to rein- 
state,— competitive business, so called, being incipiently 
monopolistic enterprise. 


218 Professor Clark’s Economics 


Apart from this theoretical bearing, the measures which 
Mr. Clark advocates for the repression of monopoly, un- 
der the head of applications “to modern problems of — 
industry and public policy,” may be good economic policy — 
or they may not,— they are the expression of a sound 
common sense, an unvitiated solicitude for the welfare — 
of mankind, and a wide information as to the facts of 
the situation. The merits of this policy of repression, as 
such, cannot be discussed here. On the other hand, the 
relation of this policy to the theoretical groundwork of | 
the treatise needs also not be discussed here, inasmuch 
as it has substantially no relation to the theory. In this 
later portion of the volume Mr. Clark does not lean on 
doctrines of “ final utility,” “final productivity,” or, in-— 
deed, on hedonistic economics at large. He speaks elo- 
quently for the material and cultural interests of the 
community, and the references to his law of “ natural 
distribution” might be cut bodily out of the discussion 
without lessening the cogency of his appeal or exposing 
any weakness in his position. Indeed, it is by no means” 
certain that such an excision would not strengthen his 
appeal to men’s sense of justice by eliminating irrelevant © 
matter. 

Certain points in this later portion of the volume, how- 
ever, where the argument is at variance with specific arti- 
cles of theory professed by Mr. Clark, may be taken up, 
mainly to elucidate the weakness of his theoretical posi- 
tion at the points in question. He recognises with more 
than the current degree of freedom that the growth and 
practicability of monopolies under modern conditions 
is chiefly due to the negotiability of securities represent- 
ing capital, coupled with the joint-stock character of mod- 
ern business concerns.*? These features of the mode 


—— 


32 Cf. chap. xxii, especially pp. 378-392. 


Professor Clark’s Economics 219 


(capitalistic) business situation enable a sufficiently few 
men to control a section of the community sufficiently 
large to make an effective monopoly. The most effective 
known form of organisation for purposes of monopoly, 
according to Mr. Clark, is that of the holding company, 
and the ordinary corporation follows it closely in effec- 
tiveness in this respect. The monopolistic control is ef- 
fected by means of the vendible securities covering the 
capital engaged. To meet the specifications of Mr. 
Clark’s theory of capital, these vendible securities — as 
e.g., the securities (common stock) of a holding company 
— should be simply the formal evidence of the ownership 
of certain productive goods and the like. Yet, by his 
own showing, the ownership of a share of productive 
goods proportionate to the face value, or the market value, 
of the securities is by no means the chief consequence of 
such an issue of securities.** One of the consequences, 
and for the purposes of Mr. Clark’s argument the grav- 
est consequence, of the employment of such securities, 
is the dissociation of ownership from the control of the 
industrial equipment, whereby the owners of certain se- 
curities, which stand in certain immaterial, technical re- 
lations to certain other securities, are enabled arbitrarily 
to control the use of the industrial equipment covered by 
the latter. These are facts of the modern organisation 
of capital, affecting the productivity of the industrial 
equipment and its serviceability both to its owners and 
to the community. They are facts, though not physically 
tangible objects; and they have an effect on the service- 
ability of industry no less decisive than the effect which 
any group of physically tangible objects of equal market 
value have. They are, moreover, facts which are bought 
and sold in the purchase and sale of these securities, as, 


33 Cf. p. 391. 


220 Professor Clark’s Economics 


e.g., the common stock of a holding company. They have a 
value, and therefore they have a “ total effective utility.” 
In short, these facts are intangible assets, which are 
the most consequential element in modern capital, but — 
which have no existence in the theory of capital by which _ 
Mr. Clark aims to deal with “ modern problems of indus- 
try.” Yet, when he comes to deal with these problems, — 
it is, of necessity, these intangible assets that immediately 
engage his attention. These intangible assets are an out- 
growth of the freedom of contract under the conditions 
imposed by the machine industry; yet Mr. Clark proposes 
to suppress this category of intangible assets without 
prejudice to freedom of contract or to the machine indus- 
try, apparently without having taken thought of the les- 
son which he rehearses (pp. 390-391) from the intro- 
duction of the holding company, with its “sinister per- 
fection,” to take the place of the (less efficient) “ trust ” 
when the latter was dealt with somewhat as it is now 
proposed to deal with the holding company. One is 
tempted to remark that a more naive apprehension of 
the facts of modern capital would have afforded a more 
competent realisation of the problems of monopoly: 


It appears from what has just been said of Mr. Clark’s 
“natural ” distribution and of his dealing with the prob- 
lems of modern industry that the logic of hedonism is of | 
no avail for the theory of business affairs. Yet it is held, 
perhaps justly, that the hedonistic interpretation may be 
of great avail in analysing the industrial functions of the 
community, in their broad, generic character, even if it 
should not serve so well for the intricate details of the 
modern business situation. It may be at least a service- 
able hypothesis for the outlines of economic theory, for 
the first approximations to the “ economic laws” sought 


Professor Clark’s Economics 221 


by taxonomists. To be serviceable for this purpose, the 
hypothesis need perhaps not be true to fact, at least not 
in the final details of the community’s life or without 
material qualification; ** but it must at least have that 
ghost of actuality that is implied in consistency with its 
own corollaries and ramifications. 

As has been suggested in an earlier paragraph, it is 
characteristic of hedonistic economics that the large and 
central element in its theoretical structure is the doctrine 
of distribution. Consumption being taken for granted 
as a quantitive matter simply,— essentially a matter of 
an insatiable appetite,— economics becomes a theory of 
acquisition; production is, theoretically, a process of ac- 
quisition, and distribution a process of distributive acqui- 
sition. The theory of production is drawn in terms of 
the gains to be acquired by production; and under com- 
petitive conditions this means necessarily the acquisition 
of a distributive share of what is available. The rest of 
what the facts of productive industry include, as, e.g., the 
facts of workmanship or the “ state of the industrial arts,” 
gets but a scant and perfunctory attention. Those mat- 
ters are not of the theoretical essence of the scheme. Mr. 
Clark’s general theory of production does not differ sub- 
stantially from that commonly professed by the marginal- 
utility school. It is a theory of competitive acquisition. 
An inquiry into the principles of his doctrine, therefore, 
as they appear, e.g., in the early chapters of the Essen- 
tials, is, in effect, an inquiry into the competence of the 
main theorems of modern hedonistic economics. 

“ All men seek to get as much net service from material 
wealth as they can.” “Some of the benefit received is 
neutralised by the sacrifice incurred; but there is a net 
surplus of gains not thus canceled by sacrifices, and the 


34 Cf. Essentials, p. 30. 


222 Professor Clark’s Economics 


generic motive which may properly be called economic — 
is the desire to make this surplus large.” ** It is of the 
essence of the scheme that the acquisitive activities of — 
mankind afford a net balance of pleasure. It is out of 
this net balance, presumably, that “the consumer’s sur- 
pluses ” arise, or it is in this that they merge. This opti- 
mistic conviction is a matter of presumption, of course; 
but it is universally held to be true by hedonistic econo- 
mists, particularly by those who cultivate the doctrines of 
marginal utility. It is not questioned and not proven. It 
seems to be a surviving remnant of the eighteenth-century 
faith in a benevolent Order of Nature; that is to say, it 
is a rationalistic metaphysical postulate. It may be true 
or not, as matter of fact; but it is a postulate of the school, 
and its optimistic bias runs like a red thread through all 
the web of argument that envelops the “normal” com-— 
petitive system. A surplus of gain is normal to the theo- 
retical scheme. | 
The next great theorem of this theory of acquisition 
is at cross-purposes with this one. Men get useful goods 
only at the cost of producing them, and production is 
irksome, painful, as has been recounted above. They go 
on producing utilities until, at the margin, the last in- 
crement of utility in the product is balanced by the con- 
comitant increment of disutility in the way of irksome 
productive effort,— labor or abstinence. At the margin, 
pleasure-gain is balanced by pain-cost. But the “ effec- 
tive utility ” of the total product is measured by that of 
the final unit; the effective utility of the whole is given 
by the number of units of product multiplied by the — 
effective utility of the final unit; while the effective dis- 
utility (pain-cost) of the whole is similarly measured by 
the pain-cost of the final unit. The “total effective 


35 Essentials, p. 39. 


Professor Clark’s Economics 223 


utility” of the producer’s product equals the “total ef- 
fective disutility” of his pains of acquisition. Hence 
there is no net surplus of utility in the outcome. 

The corrective objection is ready to hand,** that, while 
the balance of utility and disutility holds at the margin, 
it does not hold for the earlier units of the product, these 
earlier units having a larger utility and a lower cost, and 
so leaving a large net surplus of utility, which gradually 
declines as the margin is approached. But this attempted 
correction evades the hedonistic test. It shifts the ground 
from the calculus to the objects which provoke the calcu- 
lation. Utility is a psychological matter, a matter of 
pleasurable appreciation, just as disutility, conversely, is 
a matter of painful appreciation. The individual who 
is held to count the costs and the gain in this hedo- 
nistic calculus is, by supposition, a highly reasonable per- 
son. He counts the cost to him as an individual against 
the gain to him as an individual. He looks before and 
after, and sizes the whole thing up in a reasonable course 
of conduct. The “absolute utility” would exceed the 
“ effective utility ” only on the supposition that the “ pro- 
ducer” is an unreflecting sensory apparatus, such as the 
beasts of the field are supposed to be, devoid of that gift 
of appraisement and calculation which is the hypothetical 
hedonist’s only human trait. There might on such a 
supposition — if the producer were an intelligent sensi- 
tive organism simply — emerge an excess of total pleasure 
over total pain, but there could then be no talk of utility 
or of disutility, since these terms imply intelligent reflec- 

tion, and they are employed because they do so. The 
hedonistic producer looks to his own cost and gain, as an 
intelligent pleasure-seeker whose consciousness compasses 
the contrasted elements as wholes. He does not contrast 


86 Cf, Essentials, chap. iii, especially pp. 51-56. 


224 Professor Clark’s Economics 


the balance of pain and pleasure in the morning with the 
balance of pain and pleasure in the afternoon, and say 
that there is so much to the good because he was not so 
tired in the morning. Indeed, by hypothesis, the pleas- 
ure to be derived from the consumption of the product is 
a future, or expected, pleasure, and can be said to be pres- 
ent, at the point of time at which a given unit of pain- 
cost is incurred, only in anticipation; and it cannot be 
said that the anticipated pleasure attaching to a unit of 
product which emerges from the effort of the producer 
during the relatively painless first hour’s work exceeds 
the anticipated pleasure attaching to a similar unit emerg- 
ing from the second hour’s work. Mr. Clark has, in ef- 
fect, explained this matter in substantially the same way 
in another connection (¢.g., p. 42), where he shows that 
the magnitude on which the question of utility and cost 
hinges is the “ total effective utility,” and that the “total 
absolute utility ” is a matter not of what hedonistically is, 
in respect of utility as an outcome of production, but of 
what might have been under different circumstances. 

An equally unprofitable result may be reached from 
the same point of departure along a different line of argu- 
ment. Granting that increments of product should be 
measured, in respect of utility, by comparison with the 
disutility of the concomitant increment of cost, then the 
diagrammatic arguments commonly employed are inade- 
quate, in that the diagrams are necessarily drawn in 
two dimensions only,— length and breadth: whereas they 


should be drawn in three dimensions, so as to take account — 


of the intensity of application as well as of its duration.*” 


37 This difficulty is recognized by the current marginal-utility © 


arguments, and an allowance for intensity is made or presumed. 
But the allowance admitted is invariably insufficient. It might be 
said to be insufficient by hypothesis, since it is by hypothesis too 
small to offset the factor which it is admitted to modify. 


Professor Clark’s Economics 225 


Apparently, the exigencies of graphic representation, for- 
tified by the presumption that there always emerges a 
surplus of utility, have led marginal-utility theorists, in 
effect, to overlook this matter of intensity of applica- 
tion. 

When this element is brought in with the same freedom 
as the other two dimensions engaged, the argument will, 
in hedonistic consistency, run somewhat as follows,— the 
run of the facts being what it may. The producer, setting 
out on this irksome business, and beginning with the 
production of the exorbitantly useful initial unit of prod- 
uct, will, by hedonistic necessity, apply himself to the 
task with a correspondingly extravagant intensity, the 
irksomeness (disutility) of which necessarily rises to such 
a pitch as to leave no excess of utility in this initial unit 
of product above the concomitant disutility of the initial 
unit of productive effort.*® As the utility of subsequent 
units of product progressively declines, so will the pro- 
ducer’s intensity of irksome application concomitantly 
decline, maintaining a nice balance between utility and 
disutility throughout. There is, therefore, no excess of 
“absolute utility” above “ effective utility” at any point 
on the curve, and no excess of “total absolute utility ” 
above “ total effective utility ” of the product as a whole, 
nor above the ‘‘total absolute disutility” or the “ total 
effective disutility ” of the pain-cost. 

A transient evasion of this outcome may perhaps be 
sought by saying that the producer will act wisely, as a 

88 The limit to which the intensity rises is a margin of the same 
kind as that which limits the duration. This supposition, that 
the intensity of application necessarily rises to such a pitch that 
its disutility overtakes and offsets the utility of the product, may 
be objected to as a bit of puerile absurdity; but it is a long 


time since puerility or absurdity has been a bar to any suppo- 
Sition in arguments on marginal utility. 


226 Professor Clark’s Economics 


good hedonist should, and save his energies during the 
earlier moments of the productive period in order to 
get the best aggregate result from his day’s labor, instead 
of spending himself in ill-advised excesses at the outset. 
Such seems to be the fact of the matter, so far as the 
facts wear a hedonistic complexion; but this correction 
simply throws the argument back on the previous posi- 
tion and concedes the force of what was there claimed. 
It amounts to saying that, instead of appreciating each 
successive unit of product in isolated contrast with its con- 
comitant unit of irksome productive effort, the producer, 
being human, wisely looks forward to his total product 
and rates it by contrast with his total pain-cost. Where- 
upon, as before, no net surplus of utility emerges, under 
the rule which says that irksome production of utilities 
goes on until utility and disutility balance. 

But this revision of “final productivity ” has further 
consequences for the optimistic doctrines of hedonism. 
Evidently, by a somewhat similar line of argument the 
“consumer’s surplus’ will be made to disappear, even 
as this that may be called the “ producer’s surplus ” has 
disappeared. Production being acquisition, and the con- 
sumer’s cost being cost of acquisition, the argument above 
should apply to the consumer’s case without abatement. 
On considering this matter in terms of the hedonistic- 
ally responsive individual concerned, with a view to de- 
termining whether there is, in his calculus of utilities 


and costs, any margin of uncovered utilities left over — 
after he has incurred all the disutilities that are worth — 
while to him,— instead of proceeding on a comparison — 
between the pleasure-giving capacity of a given article 


and the market price of the article, all such alleged 
differential advantages within the scope of a single sensory 


| 
| 
| 


Professor Clark’s Economics 227 


are seen to be nothing better than an illusory diffractive 
effect due to a faulty instrument. 

But the trouble does not end here. The equality: 
pain-cost — pleasure-gain, is not a competent formula. 
It should be: pain-cost incurred = pleasure-gain antici- 
pated. And between these two formulas lies the old 
adage, “there’s many a slip ’twixt the cup and the lip.” 
In an appreciable proportion of ventures, endeavors, and 
enterprises, men’s expectations of pleasure-gain are in 
some degree disappointed,—through miscalculation, 
through disserviceable secondary effects of their produc- 
tive efforts, by “ the act of God,” by “ fire, flood, and pes- 
tilence.” In the nature of things these discrepancies fall 
out on the side of loss more frequently than on that of 
gain. After all allowance has been made for what may 
be called serviceable errors, there remains a margin of 
disserviceable error, so that pain-cost > eventual pleasure- 
gain — anticipated pleasure-gain—n. Hence, in general, 
pain-cost > pleasure-gain. Hence it appears that, in the 
nature of things, men’s pains of production are underpaid 
by that much; although it may, of course, be held that 
the nature of things at this point is not “natural” or 
“normal.” 

To this it may be objected that the risk is discounted. 
Insurance is a practical discounting of risk; but insurance 
is resorted to only to cover risk that is appreciated by the 
person exposed to it, and it is such risks as are not ap- 
preciated by those who incur them that are chiefly in 
question here. And it may be added that insurance has 
hitherto not availed to equalise and distribute the chances 
of success and failure. Business gains — enterpreneur’s 
gains, the rewards of initiative and enterprise — come out 
of this uncovered margin of adventure, and the losses 


228 Professor Clark’s Economics 


of initiative and enterprise are to be set down to the same 
account. In some measure this element of initiative and 
enterprise enters into all economic endeavor. And it is 
not unusual for economists to remark that the volume — 
of unsuccessful or only partly successful enterprise is — 
very large. There are some lines of enterprise that are, 
as one might say, extra hazardous, in which the average 
falls out habitually on the wrong side of the account. 
Typical of this class is the production of the precious 
metals, particularly as conducted under that régime of 
free competition for which Mr. Clark speaks. It has been 
the opinion, quite advisedly, of such economists of the 
classic age of competition as J. S. Mill and Cairnes, e.g., 
that the world’s supply of the precious metals has been 
got at an average or total cost exceeding their value by 
several fold. The producers, under free competition at 
least, are over-sanguine of results. 

But, in strict consistency, the hedonistic theory of hu- 
man conduct does not allow men to be guided in their 
calculation of cost and gain, when they have to do with 
the precious metals, by different norms from those which 
rule their conduct in the general quest of gain. The 
visible difference in this respect between the production 
of the precious metals and production generally should 
be due to the larger proportions and greater notoriety 
of the risks in this field rather than to a difference in the 
manner of response to the stimulus of expected gain. 
The canons of hedonistic calculus permit none but a 
quantitative difference in the response. What happens 
in the production of the precious metals is typical of 
what happens in a measure and more obscurely through- 
out the field of productive effort. 

Instead of a surplus of utility of product above the 
disutility of acquisition, therefore, there emerges an 


! 
| 
{ 
; 
. 


Professor Clark’s Economics 229 


average or aggregate net hedonistic deficit. On a con- 
sistent marginal-utility theory, all production is a losing 
game. The fact that Nature keeps the bank, it appears, 
does not take the hedonistic game of production out of 
the general category known of old to that class of san- 
guine hedonistic calculators whose day-dreams are filled 
with safe and sane schemes for breaking the bank. 
“Hope springs eternal in the human breast.” Men are 
congenitally over-sanguine, it appears; and the produc- 
tion of utilities is, mathematically speaking, a function of 
the pig-headed optimism of mankind. It turns out that 
the laws of (human) nature malevolently grind out vexa- 
tion for men instead of benevolently furthering the great- 
est happiness of the greatest number. The sooner the 
whole traffic ceases, the better— the smaller will be the 
net balance of pain. The great hedonistic Law of Na- 
ture turns out to be simply the curse of Adam, backed 
by the even more sinister curse of Eve. 


The remark was made in an earlier paragraph that Mr. 
Clark’s theories have substantially no relation to his 
practical proposals. This broad declaration requires an 
equally broad qualification. While the positions reached 
in his theoretical development count for nothing in mak- 
ing or fortifying the positions taken on “ problems of 
modern industry and public policy,” the two phases of 
the discussion — the theoretical and the pragmatic — are 
the outgrowth of the same range of preconceptions and 
run back to the same metaphysical ground. The present 
canvass of items in the doctrinal system has already far 
Overpassed reasonable limits, and it is out of the ques- 
tion here to pursue the exfoliation of ideas through 
Mr. Clark’s discussion of public questions, even in the 
fragmentary fashion in which scattered items of the 


230 Professor Clark’s Economics 


theoretical portion of his treatise have been passed in 
review. But a broad and rudely drawn characterisa- 
tion may yet be permissible. This latter portion of the 
volume has the general complexion of a Bill of Rights. 
This is said, of course, with no intention of imputing a 
fault. It implies that the scope and method of the dis- 
cussion is governed by the preconception that there is 
one right and beautiful definitive scheme of economic 
life, “to which the whole creation tends.” Whenever 
and in so far as current phenomena depart or diverge 
from this definitive “natural” scheme or from the 
straight and narrow path that leads to its consummation, 
there is a grievance to be remedied by putting the wheels 
back into the rut. The future, such as it ought to be,— 
the only normally possible, natural future scheme of life, 
—jis known by the light of this preconception; and men 
have an indefeasible right to the installation and main- 
tenance of those specific economic relations, expedients, 
institutions, which this ‘“‘ natural” scheme comprises, and 
to no others. The consummation is presumed to dom- 
inate the course of things which is presumed to lead up © 
to the consummation. The measures of redress whereby ~ 
the economic Order of Nature is to renew its youth are 
simple, direct, and short-sighted, as becomes the pro- 
posals of pre-Darwinian hedonism, which is not trou- 
bled about the exuberant uncertainties of cumulative 
change. No doubt presents itself but that the com- ~ 
munity’s code of right and equity in economic matters — 
will remain unchanged under changing conditions of eco- 
nomic life. 


THE LIMITATIONS OF MARGINAL UTILITY? 


The limitations of the marginal-utility economics are 
sharp and characteristic. It is from first to last a doc- 
trine of value, and in point of form and method it is a 
theory of valuation. The whole system, therefore, lies 
within the theoretical field of distribution, and it has but 
a secondary bearing on any other economic phenomena 
than those of distribution — the term being taken in its 
accepted sense of pecuniary distribution, or distribution 
in point of ownership. Now and again an attempt is 
made to extend the use of the principle of marginal util- 
ity beyond this range, so as to apply it to questions of 
production, but hitherto without sensible effect, and neces- 
sarily so. The most ingenious and the most promising of 
such attempts have been those of Mr. Clark, whose work 
marks the extreme range of endeavor and the extreme de- 
gree of success in so seeking to turn a postulate of dis- 
tribution to account for a theory of production. But the 
outcome has been a doctrine of the production of values, 
and value, in Mr. Clark’s as in other utility systems, is a 
matter of valuation; which throws the whole excursion 
back into the field of distribution. Similarly, as regards 
attempts to make use of this principle in an analysis of 
the phenomena of consumption, the best results arrived 
at are some formulation of the pecuniary distribution of 
consumption goods. 

Within this limited range marginal-utility theory is of a _ 

1 Reprinted by permission from the Journal of Political Econ- 


omy, Vol. XVII, No. 9 November 1909. 
231 


232 The Limitations of Marginal Utility 


wholly statical character. It offers no theory of a move- 

ment of any kind, being occupied with the adjustment of — 
values to a given situation. Of this, again, no more con- 

vincing illustration need be had than is afforded by the 

work of Mr. Clark, which is not excelled in point of ear- 

nestness, perseverance, or insight. For all their use of 

the term “dynamic,” neither Mr. Clark nor any of his — 
associates in this line of research have yet contributed — 
anything at all appreciable to a theory of genesis, growth, © 
sequence, change, process, or the like, in economic life. — 
They have had something to say as to the bearing which 
given economic changes, accepted as premises, may have 
on valuation, and so on distribution; but as to the causes 
of change or the unfolding sequence of the phenomena of 
economic life they have had nothing to say hitherto; nor 
can they, since their theory is not drawn in causal terms 
but in terms of teleology. 

In all this the marginal-utility school is substantially at 
one with the classical economics of the nineteenth cen- 
tury, the difference between the two being that the former 
is confined within narrower limits and sticks more con- 
sistently to its teleological premises. Both are teleolog- 
ical, and neither can consistently admit arguments from 
cause to effect in the formulation of their main articles of 
theory. Neither can deal theoretically with phenomena 
of change, but at the most only with rational adjust- 
ment to change which may be supposed to have super- 
vened. 

To the modern scientist the phenomena of growth and 
change are the most obtrusive and most consequential 
facts observable in economic life. For an understandin 
of modern economic life the technological advance of the 
past two centuries—e.g., the growth of the industrial 
arts — is of the first importance; but marginal-utility th 


Se 


The Limitations of Marginal Utility 233 


ory does not bear on this matter, nor does this matter bear 
on marginal-utility theory. As a means of theoretically 
accounting for this technological movement in the past or 
in the present, or even as a means of formally, technically 
stating it as an element in the current economic situation, 
that doctrine and all its works are altogether idle. The 
like is true for the sequence of change that is going for- 
ward in the pecuniary relations of modern life ; the hedon- 
istic postulate and its propositions of differential utility 
neither have served nor can serve an inquiry into these 
phenomena of growth, although the whole body of mar- 
ginal-utility economics lies within the range of these pe- 
cuniary phenomena. It has nothing to say to the growth 
of business usages and expedients or to the concomitant 
changes in the principles of conduct which govern the 
pecuniary relations of men, which condition and are con- 
ditioned by these altered relations of business life or 
which bring them to pass. 

It is characteristic of the school that wherever an ele- 
ment of the cultural fabric, an institution or any institu- 
tional phenomenon, is involved in the facts with which the 
theory is occupied, such institutional facts are taken for 
granted, denied, or explained away. If it is a question of 
price, there is offered an explanation of how exchanges 
may take place with such effect as to leave money and 
price out of the account. If it is a question of credit, the 
effect of credit extension on business traffic is left on one 
side and there is an explanation of how the borrower and 
lender cooperate to smooth out their respective income 
streams of consumable goods or sensations of consump- 
tion. The failure of the school in this respect is consist- 
ent and comprehensive. And yet these economists are 
lacking neither in intelligence nor in information. They 
are, indeed, to be credited, commonly, with a wide range 


234 The Limitations of Marginal Utility 


of information and an exact control of materials, as well 
as with a very alert interest in what is going on; and 
apart from their theoretical pronouncements the members 
of the school habitually profess the sanest and most intel- 
ligent views of current practical questions, even when 
these questions touch matters of institutional growth and 
decay. 

The infirmity of this theoretical scheme lies in its pos- 
tulates, which confine the inquiry to generalisations of the — 
teleological or “ deductive” order. These postulates, to- 
gether with the point of view and logical method that fol- 
low from them, the marginal-utility school shares with 
other economists of the classical line — for this school is 
but a branch or derivative of the English classical econ- | 
omists of the nineteenth century. The substantial differ- 
ence between this school and the generality of classical 
economists lies mainly in the fact that in the marginal- — 
utility economics the common postulates are more consist-— 
ently adhered to at the same time that they are more © 
neatly defined and their limitations are more adequately 
realized. Both the classical school in general and its spe- 
cialized variant, the marginal-utility school, in particular, — 
take as their common point of departure the traditional — 
psychology of the early nineteenth-century hedonists, 
which is accepted as a matter of course or of common — 
notoriety and is held quite uncritically. The central and 
well-defined tenet so held is that of the hedonistic cal- 
culus. Under the guidance of this tenet and of the other — 
psychological conceptions associated and consonant with — 
it, human conduct is conceived of and interpreted as a 
rational response to the exigencies of the situation in 
which mankind is placed; as regards economic conduct it — 
is such a rational and unprejudiced response to the stimu-_ 
lus of anticipated pleasure and pain — being, typically 


The Limitations of Marginal Utility 235 


and in the main, a response to the promptings of antici- 
pated pleasure, for the hedonists of the nineteenth cen- 
tury and of the marginal-utility school are in the main 
of an optimistic temper.” Mankind is, on the whole and 
normally, (conceived to be) clearsighted and farsighted 
in its appreciation of future sensuous gains and losses, al- 
though there may be some (inconsiderable) difference 
between men in this respect. Men’s activities differ, 
therefore, (inconsiderably) in respect of the alertness of 
the response and the nicety of adjustment of irksome 
pain-cost to apprehended future sensuous gain; but, on the 
whole, no other ground or line or guidance of conduct 
than this rationalistic calculus falls properly within the 
cognizance of the economic hedonists. Such a theory can 
take account of conduct only in so far as it is rational 
conduct, guided by deliberate and exhaustively intelligent 
choice — wise adaptation to the demands of the main 
chance. 

The external circumstances which condition conduct 
are variable, of course, and so they will have a varying 
effect upon conduct; but their variation is, in effect, con- 
strued to be of such a character only as to vary the degree 
of strain to which the human agent is subject by contact 
with these external circumstances. The cultural ele- 
ments involved in the theoretical scheme, elements that 

2 The conduct of mankind differs from that of the brutes in be- 
ing determined by anticipated sensations of pleasure and pain, 
instead of actual sensations. Hereby, in so far, human conduct 
is taken out of the sequence of cause and effect and falls in- 
stead under the rule of sufficient reason. By virtue of this ra- 
tional faculty in man the connection between stimulus and re- 
sponse is teleological instead of causal. 

The reason for assigning the first and decisive place to pleas- 
ure, rather than to pain, in the determination of human conduct, 
appears to be the (tacit) acceptance of that optimistic doctrine 


of a beneficent order of nature which the nineteenth century in- 
herited from the eighteenth. 


236 The Limitations of Marginal Utility 


are of the nature of institutions, human relations gov- 
erned by use and wont in whatever kind and connection, 
are not subject to inquiry but are taken for granted as 
pre-existing in a finished, typical form and as making up a 
normal and definitive economic situation, under which 
and in terms of which human intercourse is necessarily 
carried on. This cultural situation comprises a few 


large and simple articles of institutional furniture, to- 


gether with their logical implications or corollaries; but 
it includes nothing of the consequences or effects caused 
by these institutional elements. The cultural elements so 
tacitly postulated as immutable conditions precedent to 


economic life are ownership and free contract, together — 


with such other features of the scheme of natural rights 
as are implied in the exercise of these. These cultural 
products are, for the purpose of the theory, conceived to 
be given a priori in unmitigated force. They are part of 
the nature of things; so that there is no need of account- 
ing for them or inquiring into them, as to how they have 
come to be such as they are, or how and why they have 
changed and are changing, or what effect all this may 


have on the relations of men who live by or under this © 


cultural situation. 


Evidently the acceptance of these immutable premises, — 


tacitly, because uncritically and as a matter of course, by 
hedonistic economics gives the science a distinctive char- 


acter and places it in contrast with other sciences whose — 
premises are of a different order. As has already been ~ 
indicated, the premises in question, so far as they are 
peculiar to the hedonistic economics, are (a) a certain in- 
stitutional situation, the substantial feature of which is — 


the natural right of ownership, and (D) the hedonistic 


calculus. The distinctive character given to this system 


of theory by these postulates and by the point of view 


The Limitations of Marginal Utility 237 


resulting from their acceptance may be summed up 
broadly and concisely in saying that the theory is con- 
fined to the ground of sufficient reason instead of pro- 
ceeding on the ground of efficient cause. The contrary is 
true of modern science, generally (except mathematics), 
particularly of such sciences as have to do with the phe- 
nomena of life and growth. The difference may seem 
trivial. It is serious only in its consequences. The two 
methods of inference — from sufficient reason and from 
efficient cause — are out of touch with one another and 
there is no transition from one to the other: no method of 
converting the procedure or the results of the one into 
those of the other. The immediate consequence is that 
the resulting economic theory is of a teleological character 
—“ deductive ” or “a priori” as it is often called — in- 
stead of being drawn in terms of cause and effect. The 
relation sought by this theory among the facts with which 
it is occupied is the control exercised by future (appre- 
hended) events over present conduct. Current phenom- 
ena are dealt with as conditioned by their future conse- 
quences ; and in strict marginal-utility theory they can be 
dealt with only in respect of their control of the present 
by consideration of the future. Such a (logical) rela- 
tion of control or guidance between the future and the 
present of course involves an exercise of intelligence, a 
taking thought, and hence an intelligent agent through 
whose discriminating forethought the apprehended future 
may affect the current course of events; unless, indeed, 
one were to admit something in the way of a providential 
order of nature or some occult line of stress of the nature 
of sympathetic magic. Barring magical and providential 
elements, the relation of sufficient reason runs by way of 
the interested discrimination, the forethought, of an agent 
who takes thought of the future and guides his present 


238 The Limitations of Marginal Utility 


activity by regard for this future. The relation of suf- 
ficient reason runs only from the (apprehended) future 
into the present, and it is solely of an intellectual, subjec- 
tive, personal, teleological character and force; while the 
relation of cause and effect runs only in the contrary di- 
rection, and it is solely of an objective, impersonal, mate- 
rialistic character and force. The modern scheme of 
knowledge, on the whole, rests, for its definitive ground, 
on the relation of cause and effect; the relation of suf- 
ficient reason being admitted only provisionally and as a 
proximate factor in the analysis, always with the unam- 
biguous reservation that the analysis must ultimately 
come to rest in terms of cause and effect. The merits 
of this scientific animus, of course, do not concern the 
present argument. 

Now, it happens that the relation of sufficient reason 
enters very substantially into human conduct. It is this 
element of discriminating forethought that distinguishes 
human conduct from brute behavior. And since the 
economist’s subject of inquiry is this human conduct, 
that relation necessarily comes in for a large share of 
his attention in any theoretical formulation of economic 
phenomena, whether hedonistic or otherwise. But while 
modern science at large has made the causal relation the 
sole ultimate ground of theoretical formulation; and 
while the other sciences that deal with human life admit 
the relation of sufficient reason as a proximate, supple- 
mentary, or intermediate ground, subsidiary, and subsery- 
ient to the argument from cause to effect; economics has 
had the misfortune — as seen from the scientific point of 
view —to let the former supplant the latter. It is, of 
course, true that human conduct is distinguished from 
other natural phenomena by the human faculty for tak- 
ing thought, and any science that has to do with human ~ 


The Limitations of Marginal Utility 239 


conduct must face the patent fact that the details of such 
conduct consequently fall into the teleological form; but 
it is the peculiarity of the hedonistic economics that by 
force of its postulates its attention is confined to this teleo- 
logical bearing of conduct alone. It deals with this con- 
duct only in so far as it may be construed in rationalistic, 
teleological terms of calculation and choice. But it is at 
the same time no less true that human conduct, economic 
or otherwise, is subject to the sequence of cause and 
effect, by force of such elements as habituation and con- 
ventional requirements. But facts of this order, which 
are to modern science of graver interest than the teleolog- 
ical details of conduct, necessarily fall outside the atten- 
tion of the hedonistic economist, because they cannot be 
construed in terms of sufficient reason, such as his postu- 
lates demand, or be fitted into a scheme of teleological 
doctrines. 

There is, therefore, no call to impugn these premises of 
the marginal-utility economics within their field. They 
commend themselves to all serious and uncritical persons 
at the first glance. They are principles of action which 
underlie the current, business-like scheme of economic 
life, and as such, as practical grounds of conduct, they are 
not to be called in question without questioning the exist- 
ing law and order. As a matter of course, men order 
their lives by these principles and, practically, entertain 
no question of their stability and finality. That is what 
is meant by calling them institutions; they are settled 
habits of thought common to the generality of men. But 
it would be mere absentmindedness in any student of civ- 
ilization therefore to admit that these or any other human 
institutions have this stability which is currently imputed 
to them or that they are in this way intrinsic to the nature 
of things. The acceptance by the economists of these or 


240 The Limitations of Marginal Utility 


other institutional elements as given and immutable lim- 
its their inquiry in a particular and decisive way. It 
shuts off the inquiry at the point where the modern sci- 
entific interest sets in. The institutions in question are 
no doubt good for their purpose as institutions, but they 
are not good as premises for a scientific inquiry into the 
nature, origin, growth, and effects of these institutions 
and of the mutations which they undergo and which they 
bring to pass in the community’s scheme of life. 

To any modern scientist interested in economic phe- 
nomena, the chain of cause and effect in which any given 
phase of human culture is involved, as well as the cumula- 
tive changes wrought in the fabric of human conduct 
itself by the habitual activity of mankind, are matters 
of more engrossing and more abiding interest than the 
method of inference by which an individual is presumed 
invariably to balance pleasure and pain under given con- 
ditions that are presumed to be normal and invariable. 
The former are questions of the life-history of the race 
or the community, questions of cultural growth and of 
the fortunes of generations; while the latter is a question 
of individual casuistry in the face of a given situation that 
may arise in the course of this cultural growth. The 
former bear on the continuity and mutations of that 
scheme of conduct whereby mankind deals with its mate- 
rial means of life; the latter, if it is conceived in hedon- 
istic terms, concerns a disconnected episode in the sensu- 
ous experience of an individual member of such a com- 
munity. 

In so far as modern science inquires into the phenom- 
ena of life, whether inanimate, brute, or human, it is 
occupied about questions of genesis and cumulative 
change, and it converges upon a theoretical formulation in 
the shape of a life-history drawn in causal terms. In so 


The Limitations of Marginal Utility 241 


far as it is a science in the current sense of the term, 
any science, such as economics, which has to do with 
human conduct, becomes a genetic inquiry into the human 
scheme of life; and where, as in economics, the subject of 
inquiry is the conduct of man in his dealings with the ma- 
terial means of life, the science is necessarily an inquiry 
into the life-history of material civilization, on a more or 
less extended or restricted plan.|/ Not that the econo- 
mist’s inquiry isolates material civilization from all other 
phases and bearings of human culture, and so studies 
the motions of an abstractly conceived “ economic man.” 
On the contrary, no theoretical inquiry into this material 
civilization that shall be at all adequate to any scientific 
purpose can be carried out without taking this material 
civilization in its causal, that is to say, its genetic, rela- 
tions to other phases and bearings of the cultural com- 
plex; without studying it as it is wrought upon by other 
lines of cultural growth and as working its effects in these 
other lines. But in so far as the inquiry is economic sci- 
ence, specifically, the attention will converge upon the 
scheme of material life and will take in other phases of 
civilization only in their correlation with the scheme of 
material civilization. 

Like all human culture this material civilization is a 
scheme of institutions — institutional fabric and institu- 
tional growth.) But institutions are an outgrowth of 
habit. The growth of culture is a cumulative sequence of 
habituation, and the ways and means of it are the habit- 
ual response of human nature to exigencies that vary in- 
continently, cumulatively, but with something of a con- 
sistent sequence in the cumulative variations that so go 
forward,— incontinently, because each new move creates 
a new situation which induces a further new variation 
in the habitual manner of response; cumulatively, because 


242 + The Limitations of Marginal Utility 


each new situation is a variation of what has gone before 
it and embodies as causal factors all that has been effected 
by what went before; consistently, because the underlying 
traits of human nature (propensities, aptitudes, and what 
not) by force of which the response takes place, and on 
the ground of which the habituation takes effect, remain — 
substantially unchanged. . 
Evidently an economic inquiry which occupies itself ex- : 
clusively with the movements of this consistent, elemental — 
human nature under given, stable institutional conditions — 
—such as is the case with the current hedonistic eco- 
nomics — can reach statical results alone; since it makes 
abstraction from those elements that make for anything — 
but a statical result. On the other hand an adequate the- 
ory of economic conduct, even for statical purposes, can- 
not be drawn in terms of the individual simply —as is 
the case in the marginal-utility economics — because it 
cannot be drawn in terms of the underlying traits of 
human nature simply; since the response that goes to 
make up human conduct takes place under institutional 
norms and only under stimuli that have an institutional 
bearing; for the situation that provokes and inhibits ac- 
tion in any given case is itself in great part of institu- 
tional, cultural derivation. Then, too, the phenomena of 
human life occur only as phenomena of the life of a group” 
or community: only under stimuli due to contact with the 
group and only under the (habitual) control exercised 
by canons of conduct imposed by the group’s scheme of 
life. Not only is the individual’s conduct hedged about 
and directed by his habitual relations to his fellows in 
the group, but these relations, being of an institutional 
character, vary as the institutional scheme varies. The 
wants and desires, the end and aim, the ways and means, 
the amplitude and drift of the individual’s conduct are 


The Limitations of Marginal Utility 243 


functions of an institutional variable that is of a highly 
complex and wholly unstable character. 

The growth and mutations of the institutional fabric 
are an outcome of the conduct of the individual mem- 
bers of the group, since it is out of the experience of 
the individuals, through the habituation of individuals, 
that institutions arise ;.and it is in this same experience 
that these insfitutions act to direct and define the aims and 
end of conduct. It is, of course, on individuals that the 
system of institutions imposes those conventional stand- 
ards, ideals, and canons of conduct that make up the com- 
munity’s scheme of life. Scientific inquiry in this field, 
therefore, must deal with individual conduct and must 
formulate its theoretical results in terms of individual 
conduct. But such an inquiry can serve the purposes of 
a genetic theory only if and in so far as this individual 
conduct is attended to in those respects in which it counts 
toward habituation, and so toward change (or stability) 
of the institutional fabric, on the one hand, and in those 
respects in which it is prompted and guided by the re- 
ceived institutional conceptions and ideals on the other 
hand. The postulates of marginal utility, and the hedon- 
istic preconceptions generally, fail at this point in that 
they confine the attention to such bearings of economic 
conduct as are conceived not to be conditioned by habit- 
ual standards and ideals and to have no effect in the way 
of habituation. They disregard or abstract from the 
causal sequence of propensity and habituation in eco- 
nomic life and exclude from theoretical inquiry all such 
interest in the facts of cultural growth, in order to at- 
tend to those features of the case that are conceived to be 
idle in this respect. All such facts of institutional force 
and growth are put on one side as not being germane to 
pure theory ; they are to be taken account of, if at all, by 


244 The Limitations of Marginal Utility 


afterthought, by a more or less vague and general allow- 

ance for inconsequential disturbances due to occasional 

human infirmity. Certain institutional phenomena, it is 

true, are comprised among the premises of the hedonists, 

as has been noted above; but they are included as postu- 

lates a priori. So the institution of ownership is taken 

into the inquiry not as a factor of growth or an element 

subject to change, but as one of the primordial and im- 
mutable facts of the order of nature, underlying the hed- 

onistic calculus. Property, ownership, is presumed as 
the basis of hedonistic discrimination and it is conceived 
to be given in its finished (nineteenth-century) scope and 
force. There is no thought either of a conceivable 
growth of this definitive nineteenth-century institution — 
out of a cruder past or of any conceivable cumulative 
change in the scope and force of ownership in the present | 
or future. Nor is it conceived that the presence of this” 
institutional element in men’s economic relations in any 
degree affects or disguises the hedonistic calculus, or that 
its pecuniary conceptions and standards in any degree 
standardize, color, mitigate, or divert the hedonistic cal- 
culator from the direct and unhampered quest of the net 
sensuous gain. While the institution of property is in- 
cluded in this way among the postulates of the theory, and 
is even presumed to be ever-present in the economic 
situation, it is allowed to have no force in shaping eco- 
nomic conduct, which is conceived to run its course to its’ 
hedonistic outcome as if no such institutional factor in- 
tervened between the impulse and its realization. The 
institution of property, together with all the range of pe- 
cuniary conceptions that belong under it and that cluster 
about it, are presumed to give rise to no habitual or con- 
ventional canons of conduct or standards of valuation, no 


: 


The Limitations of Marginal Utility 245 


proximate ends, ideals, or aspirations. All pecuniary no- 
tions arising from ownership are treated simply as ex- 
pedients of computation which mediate between the pain- 
cost and the pleasure-gain of hedonistic choice, without 
lag, leak, or friction; they are conceived simply as the 
immutably correct, God-given notation of the hedonistic 
calculus. 

The modern economic situation is a business situation, 
in that economic activity of all kinds is commonly con- 
trolled by business considerations. The exigencies of 


- modern life are commonly pecuniary exigencies. That is 


to say they are exigencies of the ownership of property. 
Productive efficiency and distributive gain are both rated 
in terms of price. Business considerations are considera- 
tions of price, and pecuniary exigencies of whatever kind 
in the modern communities are exigencies of price. The 
current economic situation is a price system. Economic 
institutions in the modern civilized scheme of life are 
(prevailingly) institutions of the price system. The ac- 
countancy to which all phenomena of modern economic 
life are amenable is an accountancy in terms of price; and 
by the current convention there is no other recognized 
scheme of accountancy, no other rating, either in law or 
in fact, to which the facts of modern life are held amen- 
able. Indeed, so great and pervading a force has this 
habit (institution) of pecuniary accountancy become 
that it extends, often as a matter of course, to many facts 
which properly have no pecuniary bearing and no pecu- 
Niary magnitude, as, e.g., works of art, science, scholar- 
ship, and religion. More or less freely and fully, the 
price system dominates the current commonsense in its 
appreciation and rating of these non-pecuniary ramifica- 
tions of modern culture ; and this in spite of the fact that, 


246 The Limitations of Marginal Utility 


on reflection, all men of normal intelligence will freely 
admit that these matters lie outside the scope of pecuniary 
valuation. 

Current popular taste and the popular sense of merit 
and demerit are notoriously affected in some degree by pe-. 
cuniary considerations. It is a matter of common notori- 
ety, not to be denied or explained away, that pecuniary 
(“commercial ’’) tests and standards are habitually made 
use of outside of commercial interests proper. Precious 
stones, it is admitted, even by hedonistic economists, are 
more esteemed than they would be if they were more plen-: 
tiful and cheaper. A wealthy person meets with more | 
consideration and enjoys a larger measure of good repute 
than would fall to the share of the same person with the 
same habit of mind and body and the same record of 
good and evil deeds if he were poorer. It may well be 
that this current “ commercialisation ” of taste and appre-_ 
ciation has been overstated by superficial and hasty crit- 
ics of contemporary life, but it will not be denied that 
there is a modicum of truth in the allegation. Whatever | 
substance it has, much or little, is due to carrying over 
into other fields of interest the habitual conceptions in- 
duced by dealing with and thinking of pecuniary matters. 
These “commercial” conceptions of merit and demerit 
are derived from business experience. The pecuniary 
tests and standards so applied outside of business transac- 
tions and relations are not reducible to sensuous terms of 
pleasure and pain. Indeed, it may, e.g., be true, as is 
commonly believed, that the contemplation of a wealthy 
neighbor’s pecuniary superiority yields painful rather 
than pleasurable sensations as an immediate result; but it 
is equally true that such a wealthy neighbor is, on the 
whole, more highly regarded and more considerately 
treated than another neighbor who differs from the for-— 


The Limitations of Marginal Utility 247 


mer only in being less enviable in respect of wealth. 

It is the institution of property that gives rise to these 
habitual grounds of discrimination, and in modern times, 
when wealth is counted in terms of money, it is in terms 
of money value that these tests and standards of pecuni- 
ary excellence are applied. This much will be admitted. 
Pecuniary institutions induce pecuniary habits of thought 
which affect men’s discrimination outside of pecuniary 
matters; but the hedonistic interpretation alleges that 
such pecuniary habits of thought do not affect men’s dis- 
crimination in pecuniary matters. Although the institu- 
tional scheme of the price system visibly dominates the 
modern community’s thinking in matters that lie outside 
the economic interest, the hedonistic economists insist, in 
effect, that this institutional scheme must be accounted of 
no effect within that range of activity to which it owes its 
genesis, growth, and persistence. The phenomena of busi- 
ness, which are peculiarly and uniformly phenomena of 
price, are in the scheme of the hedonistic theory reduced 
to non-pecuniary hedonistic terms and the theoretical for- 
mulation is carried out as if pecuniary conceptions had no 
force within the traffic in which such conceptions orig- 
inate. It is admitted that preoccupation with commercial 
interests has “ commercialised ”’ the rest of modern life, 
but the “commercialisation”’ of commerce is not ad- 
mitted. Business transactions and computations in pecu- 
niary terms, such as loans, discounts, and capitalisation, 
are without hesitation or abatement converted into terms 
of hedonistic utility, and conversely. 

It may be needless to take exception to such conver- 
sion from pecuniary into sensuous terms, for the theoret- 
ical purpose for which it is habitually made; although, if 
need were, it might not be excessively difficult to show 
that the whole hedonistic basis of such a conversion is a 


248 The Limitations of Marginal Utility 


psychological misconception. But it is to the remoter 
theoretical consequences of such a conversion that excep- 
tion is to be taken. In making the conversion abstrac- 
tion is made from whatever elements do not lend them- 
selves to its terms; which amounts to abstracting from 
precisely those elements of business that have an institu- 
tional force and that therefore would lend themselves to 
scientific inquiry of the modern kind—those (institu- 
tional) elements whose analysis might contribute to an 
understanding of modern business and of the life of the 
modern business community as contrasted with the as- 
sumed primordial hedonistic calculus. 

The point may perhaps be made clearer. Money and 
the habitual resort to its use are conceived to be simply 
the ways and means by which consumable goods are ac- 
quired, and therefore simply a convenient method by 
which to procure the pleasurable sensations of consump- 
tion; these latter being in hedonistic theory the sole and 
overt end of all economic endeavor. Money values have 
therefore no other significance than that of purchasing 
power over consumable goods, and money is simply an 
expedient of computation. Investment, credit extensions, 
loans of all kinds and degrees, with payment of interest 
and the rest, are likewise taken simply as intermediate 
steps between the pleasurable sensations of consumption 
and the efforts induced by the anticipation of these sen- 
sations, other bearings of the case being disregarded 
The balance being kept in terms of the hedonistic con- 
sumption, no disturbance arises in this pecuniary traffic so 
long as the extreme terms of this extended hedonisti 
equation — pain-cost and pleasure-gain — are not altered, 
what lies between these extreme terms being merely alge 
braic notation employed for convenience of accountancy. 
But such is not the run of the facts in modern business. 


The Limitations of Marginal Utility 249 


Variations of capitalization, e. g., occur without its being 
practicable to refer them to visibly equivalent variations 
either in the state of the industrial arts or in the sensa- 
tions of consumption. Credit extensions tend to infla- 
tion of credit, rising prices, overstocking of markets, etc., 
likewise without a visible or securely traceable correlation 
in the state of the industrial arts or in the pleasures of 
consumption; that is to say, without a visible basis in 
those material elements to which the hedonistic theory 
reduces all economic phenomena. Hence the run of the 
facts, in so far, must be thrown out of the theoretical 
formulation. The hedonistically presumed final pur- 
chase of consumable goods is habitually not contemplated 
in the pursuit of business enterprise. Business men ha- 
bitually aspire to accumulate wealth in excess of the limits 
of practicable consumption, and the wealth so accumu- 
lated is not intended to be converted by a final transaction 
of purchase into consumable goods or sensations of con- 
sumption. Such commonplace facts as these, together 
with the endless web of business detail of a like pecuniary 
character, do not in hedonistic theory raise a question as 
to how these conventional aims, ideals, aspirations, and 
standards have come into force or how they affect the 
scheme of life in business or outside of it; they do not 
‘Yaise those questions because such questions cannot be 
answered in the terms which the hedonistic economists 
-are content to use, or, indeed, which their premises per- 
‘mit them to use. The question which arises is how to ex- 
plain the facts away: how theoretically to neutralize them 
‘so that they will not have to appear in the theory, which 
can then be drawn in direct and unambiguous terms of 
tational hedonistic calculation. They are explained away 
as being aberrations due to oversight or lapse of memory 
on the part of business men, or to some failure of logic or 


| 


insight. Or they are construed and interpreted into the 
rationalistic terms of the hedonistic calculus by resort to 
an ambiguous use of the hedonistic concepts. So that the 
whole “ money economy,” with all the machinery of credit 
and the rest, disappears in a tissue of metaphors to reap- 
pear theoreticaly expurgated, sterilized, and simplified” 
into a “ refined system of barter,” culminating in a net ag- 
gregate maximum of pleasurable sensations of consump- 
tion. 
But since it is in just this unhedonistic, unrationalistic 
pecuniary traffic that the tissue of business life consists; 
since it is this peculiar conventionalism of aims and stand 
ards that differentiates the life of the modern business 
community from any conceivable earlier or cruder phase 
of economic life; since it is in this tissue of pecuniary in-_ 
tercourse and pecuniary concepts, ideals, expedients, and 
aspirations that the conjunctures of business life arise and 
run their course of felicity and devastation; since it is” 
here that those institutional changes take place which dis 
tinguish one phase or era of the business community's” 
life from any other ; since the growth and change of these 
habitual, conventional elements make the growth and 
character of any business era or business community; any 
theory of business which sets these elements aside or ex= 
plains them away misses the main facts which it has gone 
out to seek. Life and its conjunctures and institutions 
being of this complexion, however much that state of 


250 The Limitations of Marginal Utility 


phenomena of this life must be drawn in these terms im) 
which the phenomena occur. It is not simply that the 
hedonistic interpretation of modern economic phenomena 


The Limitations of Marginal Utility 251 


would bear the interpretation in fact they would disappear 
in fact. If, in fact, all the conventional relations and 
principles of pecuniary intercourse were subject to such a 
perpetual rationalized, calculating revision, so that each 
article of usage, appreciation, or procedure must approve 
itself de novo on hedonistic grounds of sensuous expedi- 
ency to all concerned at every move, it is not conceivable 
that the institutional fabric would last over night. 


GUSTAV SCHMOLLER’S ECONOMICS? 


PROFESSOR SCHMOLLER’S Grundriss” is an event of the 
first importance in economic literature. It appears from 
later advices that the second and concluding volume of 
the work is hardly to be looked for at as early a date. 
as the author’s expressions in his preface had led us to 
anticipate. What lies before Professor Schmoller’s read- 
ers, therefore, in this first volume of the Outlines is but 
one-half of the compendious statement which he here 
purposes making of his theoretical position and of his 
views and exemplification of the scope and method of — 
economic science. It may accordingly seem adventurous 

to attempt a characterisation of his economic system o | 
the basis of this avowedly incomplete statement. And) 
yet such an endeavor is not altogether gratuitous, nor need — 
it in any great measure proceed on hypothetical grounds. _ 
The introduction comprised in the present volume sketches ~ 
the author’s aim in an outline sufficiently full to afford a 
convincing view of the “ system” of science for which he _ 
speaks; and the two books by which the introduction is 
followed show Professor Schmoller’s method of inquiry 
consistently carried out, as well as the reach and nature” 
of the theoretical conclusions which he considers to lie 
within the competency of economic science. And with 
regard to an economist who is so much of an innovator,— 
not to say so much of an iconoclast,— and whose work 


c 


1 Reprinted by permission from The Quarterly Journal of Eco= 
nomics, Vol. XVI, Nov., 1901. 
2Grundriss der allgemeinen Volkswirtschaftslehre. Erstet 

Teil. Leipzig, 1900. 
252 


Gustav Schmoller’s Economics 253 


touches the foundations of the science so intimately and 
profoundly, the interest of his critics and associates must, 
at least for the present, center chiefly about these ques- 
tions as to the scope and nature assigned to the theory by 
his discussion, as to the range and character of the ma- 
terial of which he makes use, and as to the methods of 
inquiry which his sagacity and experience commend. So, 
therefore, while the Outlines is yet incomplete, considered 
as a compendium of details of doctrine, the work in its 
unfinished state need not thereby be an inadequate ex- 
pression of Professor Schmoller’s relation to economic 
science. 

Herewith for the first time economic readers are put in 
possession of a fully advised deliverance on economic 
science at large as seen and cultivated by that modernised 
historical school of which Professor Schmoller is the 
authoritative exponent. Valuable and characteristic as 
his earlier discussions on the scope and method of the 
science are, they are but preliminary studies and tentative 
formulations as compared with this maturer work, which 
not only avows itself a definitive formulation, but has 
about it an air of finality perceptible at every turn. But 
this comes near saying that it embodies the sole compre- 
hensive working-out of the scientific aims of the his- 
torical school. Discussions partially covering the field, 

“monographs and sketches there are in great number, 
showing the manner of economic theory that was to be 
looked for as an outcome of the “historical diversion.” 
Some of these, especially some of the later ones, are ex- 
tremely valuable in the results they offer, as well as 
significant of the trend which the science is taking under 
the hands of the German students.* But a comprehen- 


8 E.g., K. Biicher’s Entstehung der Volkswirtschaft, and Arbeit 
und Rythmus; R. Hildebrand’s Recht und Sitte; Knapp’s Grund- 


254 Gustav Schmoller’s Economics 


sive work, aiming to formulate a body of economic — 
theory on the basis afforded by the “ historical method,” — 
has not hitherto been seriously attempted. 

To the broad statement just made exception might 
perhaps be taken in favor of Schaeffle’s half-forgotten 
work of the seventies, together possibly with several other 
less notable and less consistent endeavors of a similar — 
kind, dating back to the early decades of the school. 
Probably none of the younger generation of economists 
would be tempted to cite Roscher’s work as invalidating © 
such a statement as the one made above. Although time 
has been allowed for the acceptance and authentication of — 
these endeavors of the earlier historical economists in the 
direction of a system of economic theory,— that is to say, 
of an economic science,— they have failed of authentica-_ 
tion at the hands of the students of the science; and there 
seems no reason to regard this failure as less than de- © 
finitive. 

During the last two decades the historical school has 
branched into two main directions of growth, somewhat — 
divergent, so that broad general statements regarding the — 
historical economists can be less confidently made to-day © 
than perhaps at any earlier time. Now, as regards the — 
more conservative branch, the historical economists of the © 
stricter observance,— these modern continuers of what 
may be called the elder line of the historical school can — 
scarcely be said to cultivate a science at all, their aim 
being not theoretical work. Assuredly, the work of this — 
elder line, of which Professor Wagner is the unquestioned _ 
head, is by no means idle. It is work of a sufficiently ' 
important and valuable order, perhaps it is indispensable 
to the task which the science has in hand, but, broadly 


herrschaft und Rittergut; Ehrenberg’s Zeitalter der Fugger; 
Mucke’s various works. 


Gustav Schmoller’s Economics 255 


speaking, it need not be counted with in so far as it 
touches directly upon economic theory. This elder line 
of German economics, in its numerous modern represen- 
tatives, shows both insight and impartiality; but as re- 
gards economic theory their work bears the character of 
eclecticism rather than that of a constructive advance. 
Frequent and peremptory as their utterances commonly 
are on points of doctrine, it is only very rarely that these 
utterances embody theoretical views arrived at or verified 
by the economists who make them or by such methods of 
inquiry as are characteristic of these economists. Where 
these expressions of doctrine are not of the nature of 
maxims of expediency, they are, as is well known, com- 
monly borrowed somewhat uncritically from classical 
sources. Of constructive scientific work — that is to say, 
of theory — this elder line of German economics is inno- 
cent; nor does there seem to be any prospect of an even- 
tual output of theory on the part of that branch of the 
historical school, unless they should unexpectedly take 
advice, and make the scope, and therefore the method, of 
their inquiry something more than historical in the sense 
in which that term is currently accepted. The historical 
economics of the conservative kind seems to be a barren 
field in the theoretical respect. 

So that whatever characteristic articles of general 
theory the historical school may enrich the science with 
are to be looked for at the hands of those men who, like 
Professor Schmoller, have departed from the strict 
observance of the historical method. A peculiar inter- 
est, therefore, attaches to his work as the best accepted 
and most authoritative spokesman of that branch of his- 
torical economics which professes to cultivate theoretical 
inquiry. It serves to show in what manner and degree 
this more scientific wing of the historical school have out- 


256 Gustav Schmoller’s Economics 


grown the original “ historical” standpoint and range of 
conceptions, and how they have passed from a distrust of 
all economic theory to an eager quest of theoretical form- 
ulations that shall cover all phenomena of economic life 
to better purpose than the body of doctrine received from 
the classical writers and more in consonance with the 
canons of contemporary science at large. That this — 
should have been the outcome of the half-century of | 
development through which the school has now passed 
might well seem unexpected, if not incredible, to any who 
saw the beginning of that divergence within the school, 
a generation ago, out of which this modernised, theoret- 
ical historical economics has arisen. 

Professor Schmoller entered the field early, in the 
sixties, as a protestant against the aims and ideals then 
in vogue in economics. His protest ran not only against 
the methods and results of the classical writers, but also 
against the views professed by the leaders of the his- 
torical school, both as regards the scope of the sci- 
ence and as regards the character of the laws or gener- 
alisations sought by the science. His early work, in so 
far as he was at variance with his colleagues, was chiefly 
critical; and there is no good evidence that he then had 
a clear conception of the character of that construc- 
tive work to which it has been his persistent aim to 
turn the science. Hence he came to figure in common re- 
pute as an iconoclast and an extreme exponent of the his- 
torical school, in that he was held practically to deny the 
feasibility of a scientific treatment of economic matters 
and to aim at confining economics to narrative, statistics 
and description. This iconoclastic or critical phase of hi 
economic discussion is now past, and with it the uncer- 
tainty as to the trend and outcome of his scientific ac- 
tivity. 


Gustav Schmoller’s Economics 257 


To understand the significance of the diversion created 
by Professor Schmoller as regards the scope and method 
of economics, it is necessary, very briefly, to indicate the 
position occupied by that early generation of historical 
economists from which his teaching diverged, and more 
particularly those points of the older canon at which he 
has come to differ characteristically from the views pre- 
viously in vogue. 

As regards the situation in which the historical school, 
as exemplified by its leaders, was then placed, it is, of 
course, something of a commonplace that by the end of 
its first twenty years of endeavor in the reform of eco- 
nomic science the school had, in point of systematic re- 
sults, scarcely got beyond preliminaries. And even these 
preliminaries were not in all respects obviously to the 
purpose. A new and wider scope had been indicated 
for economic inquiry, as well as a new aim and method for 
theoretical discussion. But the new ideals of theoretical 
advance, as well as the ways and means indicated for 
their attainment, still had mainly a speculative interest. 
Nothing substantial had been done towards the realisation 
of the former or the mise en wuvre of the latter. The 
historical economists can scarcely be said at that time to 
have put their hand to the new engines which they pro- 
fessed to house in their workshop. Apart from polemics 
and speculation concerning ideals, the serious interest and 
endeavors of the school had up to that time been in the 
field of history rather than in that of economics, except so 
far as the adepts of the new school continued in a frag- 
mentary way to inculcate and, in some slight and uncer- 
tain degree, to elaborate the dogmas of the classical writ- 
ers whom they sought to discredit. 

The character of historical economics at the time when 
Professor Schmoller entered on his work of criticism and 


258 Gustav Schmoller’s Economics 


revision is fairly shown by Roscher’s writings. What- 
ever may be thought to-day of Roscher’s rank as an 
economist, in contrast with Knies and Hildebrand, it will 
scarcely be questioned that at the close of the first quar- 
ter-century of the life history of the historical school it 
was Roscher’s conception of the scope and method of 
economics that found the widest acceptance and that best 
expressed the animus of that body of students who pro- 
fessed to cultivate economics by the historical method. 
For the purpose in hand Roscher’s views may, therefore, 
be taken as typical, all the more readily since for the very 
general purpose here intended there are no serious dis- 
crepancies between Roscher and his two illustrious con- 
temporaries. The chief difference is that Roscher is 
more naive and more specific. He has also left a more 
considerable volume of results achieved by the professed 
use of his method. 

Roscher’s professed method was what he calls the “ his- 
torico-physiological’’ method. This he contrasts with the 
“ philosophical ” or “ idealistic”’ method. But his air of 
depreciation as regards “ philosophical” methods in eco- 
nomics must not be taken to mean that Roscher’s own 
economic speculations were devoid of all philosophical or 
metaphysical basis. It only means that his philosophical 
postulates were different from those of the economists 
whom he discredits, and that they were regarded by him 
as self-evident. 

As must necessarily be the case with a writer who had 
neither a special aptitude for nor special training in philo- 
sophical inquiries, Roscher’s metaphysical postulates are, 
of course, chiefly tacit. They are the common-sense, com- 
monplace metaphysics afloat in educated German circles 
in the time of Roscher’s youth,— during the period when 
his growth and education gave him his outlook on life — 


Gustav Schmoller’s Economics © 259 


and knowledge and laid the basis of his intellectual hab- 
its; which means that these postulates belong to what 
Hoffding has called the “ Romantic” school of thought, 
and are of a Hegelian complexion. Roscher being not a 
professed philosophical student, it is neither easy nor safe 
to particularise closely as regards his fundamental meta- 
physical tenets; but, as near as so specific an identifica- 
tion of his philosophical outlook is practicable, he must 
be classed with the Hegelian “Right.” But since the 
Hegelian metaphysics had in Roscher’s youth an unbroken 
vogue in reputable German circles, especially in those 
ultra-reputable circles within which lay the gentlemanly 
life and human contact of Roscher, the postulates af- 
forded by the Hegelian metaphysics were accepted sim- 
ply as a matter of course, and were not recognised as 
metaphysical at all. And in this his metaphysical affilia- 
tion Roscher is fairly typical of the early historical school 
of economics. 

The Hegelian metaphysics, in so far as bears upon the 
matter in hand, is a metaphysics of a self-realising life 
process. This life process, which is the central and sub- 
stantial fact of the universe, is of a spiritual nature,— 
“spiritual,” of course, being here not contrasted with 
“material.” The life process is essentially active, self- 
determining, and unfolds by inner necessity,— by neces- 
sity of its own substantially active nature. The course 
of culture, in this view, is an unfolding (exfoliation) of 
the human spirit; and the task which economic science 
has in hand is to determine the laws of this cultural ex- 
foliation in its economic aspect. But the laws of the cul- 
tural development with which the social sciences, in the 
Hegelian view, have to do are at one with the laws of the 
_ processes of the universe at large; and, more immedi- 
ately, they are at one with the laws of the life process at 


260 Gustav Schmoller’s Economics 


large. For the universe at large is itself a self-unfolding 
life process, substantially of a spiritual character, of which 
the economic life process which occupies the interest of 
the economist is but a phase and an aspect. Now, the 
course of the processes of unfolding life in organic na- 
ture has been fairly well ascertained by the students of 
natural history and the like; and this, in the nature of the 
case, must afford a clew to the laws of cultural develop- 
ment, in its economic as well as in any other of its aspects 
or bearings,— the laws of life in the universe being all 
substantially spiritual and substantially at one. So we 
arrive at a physiological conception of culture after the 
analogy of the ascertained physiological processes seen 
in the biological domain. It is conceived to be physiolog- 
ical after the Hegelian manner of conceiving a physiolog- 
ical process, which is, however, not the same as the mod- 
ern scientific conception of a physiological process.* 


4A physiological conception of society, or of the community, 
had been employed before,— e.g., by the Physiocrats,— and such a 
concept was reached also by English speculators —e.g., Herbert 
Spencer — during Roscher’s lifetime; but these physiological con- 
ceptions of society are reached by a different line of approach 
from that which led up to the late-Hegelian physiological or bio- 
logical conception of human culture as a spiritual structure and 
process. The outcome is also a different one, both as regards the 
use made of the analogy and as regards the theoretical results 
reached by its aid. 

It may be remarked, by the way, that neo-Hegelianism, of the 
“Left,” likewise gave rise to a theory of a self-determining cul- 
tural exfoliation; namely, the so-called “ Materialistic Conception 
of History” of the Marxian socialists. This Marxian concep- 
tion, too, had much of a physiological air; but Marx and his co- 
adjutors had an advantage over Roscher and his following, in 
that they were to a greater extent schooled in the Hegelian 
philosophy, instead of being uncritical receptacles of the Romantic 
commonplaces left by Hegelianism as a residue in popular 
thought. They were therefore more fully conscious of the bear- 
ing of their postulates and less naive in their assumptions of self- 
sufficiency. 


Gustav Schmoller’s Economics 261 


Since this quasi-physiological process of cultural de- 
velopment is conceived to be an unfolding of the self- 
realising human spirit, whose life history it is, it is of 
the nature of the case that the cultural process should 
run through a certain sequence of phases —a certain life 
history prescribed by the nature of the active, unfolding 
spiritual substance. The sequence is determined on the 
whole, as regards the general features of the development, 
by the nature of life on the human plane. The history 
of cultural growth and decline necessarily repeats itself, 
since it is substantially the same human spirit that seeks 
to realise itself in every comprehensive sequence of cul- 
tural development, and since this human spirit is the only 
factor in the case that has substantial force. In its 
generic features the history of past cultural cycles is, 
therefore, the history of the future. Hence the impor- 
tance, not to say the sole efficacy for economic science, of 
an historical scrutiny of culture. A well-authenticated 
sequence of cultural phenomena in the history of the past 
is conceived to have much the same binding force for the 
sequence of cultural phenomena in the future as a “ nat- 
ural law,” as the term has been understood in physics or 
physiology, is conceived to have as regards the course 
of phenomena in the life history of the human body; for 
the onward cultural course of the human spirit, actively 
unfolding by inner necessity, is an organic process, fol- 
lowing logically from the nature of this self-realising 
spirit. If the process is conceived to meet with obstacles 
or varying conditions, it adapts itself to the circumstances 
in any given case, and it then goes on along the line of 
its own logical bent until it eventuates in the consumma- 
tion given by its own nature. The environment, in this 
' view, if it is not to be conceived simply as a function of 
the spiritual force at work, is, at the most, of subsidiary 


262 Gustav Schmoller’s Economics 


and transient consequence only. Environmental condi- 
tions can at best give rise to minor perturbations ; they do 
not initiate a cumulative sequence which can profoundly 
affect the outcome or the ulterior course of the cultural 
process. Hence the sole, or almost sole, importance of 
historical inquiry in determining the laws of cultural de- 
velopment, economic or other. 

The working conception which this romantic-historical 
school had of economic life, therefore, is, in its way, a 
conception of development, or evolution; but it is not to 
be confused with Darwinism or Spencerianism. Inquiry 
into the cultural development under the guidance of such 
preconceptions as these has led to generalisations, more 
or less arbitrary, regarding uniformities of sequence in 
phenomena, while the causes which determine the course 
of events, and which make the uniformity or variation of 
the sequence, have received but scant attention. The 
“natural laws” found by this means are necessarily of the 
nature of empiricism, colored by the bias or ideals of the 
investigator. The outcome is a body of aphoristic wis- 
dom, perhaps beautiful and valuable after its kind, but 
quite fatuous when measured by the standards and aims 
of modern science. As is well known, no substantial 
theoretical gain was made along this romantic-historical 
line of inquiry and speculation, for the reason, apparently, 
that there are no cultural laws of the kind aimed at, be- 
yond the unprecise generalities that are sufficiently fa- 
miliar beforehand to all passably intelligent adults. 


It has seemed necessary to offer this much in charac- 
terisation of that “historical” aim and method which 
afforded a point of departure for Professor Schmoller’s 
work of revision. When he first raised his protest against 
the prevailing ideals and methods, as being ill-advised and — 


Gustav Schmoller’s Economics 263 


not thorough-going, he does not seem himself to have been 
entirely free from this Romantic, or Hegelian, bias. 
There is evidence to the contrary in his early writings.® 
Tt cannot even be said that his later theoretical work does 
not show something of the same animus, as, e.g., when he 
assumes that there is a meliorative trend in the course of 
cultural events.© What has differentiated his work from 
that of the group of writers which has above been called 
the elder line of historical economics is the weakness or 
relative absence of this bias in his theoretical work. Par- 
ticularly, he has refused to bring his researches in the field 
of theory definitely to rest on ground given by the Hegel- 
ian, or Romantic, school of thought. He was from the 
first unwilling to accept classificatory statements of uni- 
formity or of normality as an adequate answer to ques- 
tions of scientific theory. He does not commonly deny 
the truth or the importance of the empirical generalisa- 
tions aimed at by the early historical economists. Indeed, 
he makes much of them and has been notoriously urgent 
for a full survey of historical data and a painstaking di- 
gestion of materials with a view to a comprehensive work 
of empirical generalisation. As is well known, in his 
earlier work of criticism and methodological controversy 
he was led to contend that for at least one generation 
economists must be content to spend their energies on 
descriptive work of this kind; and he thereby earned the 
reputation of aiming to reduce economics to a descriptive 
knowledge of details and to confine its method to the 
Baconian ground of generalisation by simple enumeration. 
But this exhaustive historical scrutiny and description of 


5E.g., in his controversy with Treitschke. See Grundfragen 
der Soctalpolitik und der Volkswirtschaftslehre, particularly pp. 
24, 25. 

8E.g., Grundriss, pp. 225, 409, 411. 


264 Gustav Schmoller’s Economics 


detail has always, in Professor Schmoller’s view, been 
preliminary to an eventual theory of economic life. The 
survey of details and the empirical generalisations reached 
by its help are useful for the scientific purpose only as 
they serve the end of an eventual formulation of the laws 
of causation that work out in the process of economic life. 
The ulterior question, to which all else is subsidiary, is a 
question of the causes at work rather than a question of 
the historical uniformities observable in the sequence of 
phenomena. The scrutiny of historical details serves this 
end by defining the scope and character of the several 
factors causally at work in the growth of culture, and, 
what is of more immediate consequence, as they are at 
work in the shaping of the economic activities and the 
economic aims of men engaged in this unfolding cultural 
process as it lies before the investigator in the existing 
situation. 

In the preliminary work, then, of defining and charac- 
terising the causes or factors of economic life, historical 
investigation plays a large, if not the largest, part; but it 
is by no means the sole line of inquiry to which recourse 
is had for this purpose. Nor, it may be added, is this the 
sole use of historical inquiry. To the like end a compara- 
tive study of the climatic, geographical, and geological 
features of the community’s environment is drawn into 
the inquiry ; and more particularly there is a careful study 
of ethnographic parallels and a scrutiny of the psycholog- 
ical foundations of culture and the psychological factors 
involved in cultural change. 

Hence it appears that Professor Schmoller’s work dif- 
fers from that of the elder line of historical economics in 
respect of the scope and character of the preliminaries of 
economic theory no less than in the ulterior aim which he 


assigns the science. It is only by giving a very broad — 


Gustav Schmoller’s Economics 265 


meaning to the term that this latest development of the 
science can be called an “historical” economics. It is 
Darwinian rather than Hegelian, although with the ear- 
marks of Hegelian affiliation visible now and again; and 
it is “ historical’ only in a sense similar to that in which 
a Darwinian account of the evolution of economic institu- 
tions might be caller historical. For the distinguishing 
characteristic of Professor Schmoller’s work, that 
wherein it differs from the earlier work of the economists 
of his general class, is that it aims at a Darwinistic ac- 
count of the origin, growth, persistence, and variation of 
institutions, in so far as these institutions have to do with 
the economic aspect of life either as cause or as effect. 
In much of what he has to say, he is at one with his con- 
temporaries and predecessors within the historical school ; 
and he shows at many points both the excellences and 
weaknesses due to his “ historical” antecedents. But his 
striking and characteristic merits lie in the direction of a 
post-Darwinian, causal theory of the origin and growth of 
species in institutions. In this line of theoretical inquiry 
Professor Schmoller is not alone, nor does he, perhaps, 
go so far or with such singleness of purpose in this direc- 
tion as some others do at given points; but the seniority 
belongs to him, and he is also in the lead as regards the 
comprehensiveness of his work. 


But to return to the Grundriss, to which recourse must 
be had to substantiate the characterisation here offered. 
The entire work as projected comprises an Introduction 
and four Books, of which the introduction and the first 
two books are contained in the volume already published. 
The two books yet to be published, in a second volume, 
promise to be of a length corresponding to the first two. 
The present volume should accordingly contain approxi- 


: 
1 
| 


266 Gustav Schmoller’'s Economics 


mately three-fifths of the whole, counted by bulk. The 
scheme of the work is as follows: An Introduction (pp. 
I-124) treats of (1) the Concept of Economics, (2) the 
Psychical, Ethical (or Conventional, sittliche), and Legal 
Foundations of Economic Life and of Culture, and (3) 
the Literature and Method of the Science. This is fol- 
lowed by Book I. (pp. 125-228) on Land, Population, 
and the Industrial Arts, considered as collective phe- 
nomena and factors in economic life, and Book II. (pp. 
229-457), on the Constitution of Economic Society, its 
chief organs and the causal factors to which they are due. 
Books III. and IV. are to deal with the Circulation of 
Goods and the Distribution of Income, and to give a 
genetic account of the Development of Economic Society. 

The course outlined differs noticeably from what has 
been customary in treatises on economics. The point of 
departure is a comprehensive general survey of the fac- 
tors which enter into the growth of culture, with special 
reference to their economic bearing. This survey runs 
chiefly on psychological and ethnographic ground, histo 
rical inquiry in the stricter sense being relatively scant 
and obviously of secondary consequence. It is followed 
up with a more detailed and searching discussion of the 
factors engaged in the economic process in any given situ- 
ation. The factors, or “collective phenomena,” in ques- 
tion are not the time-honored Land, Labor, and Capital, 
but rather population, material environment, and techna 
logical conditions. Here, too, the discussion has to de 
with ethnographic rather than with properly historical 
material. The question of population concerns not the 
numerical force of laborers, but rather the diversity of 
race characteristics and the bearing of race endowment 
upon the growth of economic institutions. The discus- 
sion of the material environment, again, has relatively 


Gustav Schmoller’s Econonucs 267 


little to say of the fertility of the soil, and gives much 
attention to diversities of climate, geographical situation, 
and geological and biological conditions. And this first 
book closes with a survey of the growth of technological 
knowledge and the industrial arts. 

In all this the significant innovation lies not so much 
in the character of the details. They are for the most 
part commonplace enough as details of the sciences from 
which they are borrowed. They are shrewdly chosen and 
handled in such a way as to bring out their bearing upon 
the ulterior questions about which the economist’s interest 
centers; but there is, as might be expected, little attempt 
to go back of the returns given by specialists in the several 
lines of research that are laid under contribution. But 
the significance of it all lies rather in the fact that mate- 
rial of this kind should have been drawn upon for a 
foundation for economic theory, and that it should have 
seemed necessary to Professor Schmoller to make this 
introductory survey so comprehensive and so painstaking 
as it is. Its meaning is that these features of human 
nature and these forces of nature and circumstances of 
environment are the agencies out of whose interaction the 
economic situation has arisen by a cumulative process of 
change, and that it is this cumulative process of develop- 
ment, and its complex and unstable outcome, that are to 
be the economist’s subject-matter. The theoretical out- 
come for which such a foundation is prepared is neces- 
sarily of a genetic kind. It necessarily seeks to know and 
explain the structure and functions of economic society in 
terms of how and why they have come to be what they 
are, not, as so many economic writers have explained 
them, in terms of what they are good for and what they 
ought to be. It means, in other words, a deliberate at- 
tempt to substitute an inquiry into the efficient causes of 


268 Gustav Schmoller’s Economics 


economic life in the place of empirical generalisations, on 
the one hand, and speculations as to the eternal fitness of — 
things, on the other hand. 

It follows from the nature of the case that an eco- 
nomics of this genetic character, working on grounds of — 
the kind indicated, comprises nothing in the way of ad- | 
vice or admonition, no maxims of expediency, and no 
economic, political, or cultural creed. How nearly Pro- . 
fessor Schmoller conforms to this canon of continence is — 
another question. The above indicates the scope of such 
doctrines as are consistently derivable from the premises 
with which the work under review starts out, not the 
scope of its writer’s speculations on economic matters. 

The second book, by the help of prehistoric and ethno- 
graphic material as well as history, deals with the evolu- 
tion of the methods of social organisation,— the growth 
of institutions in so far as this growth shapes or is shaped 
by the exigencies of economic life. The “organs,” or — 

‘social-economic institutions, whose life history is passed — 
in review are: the family; the methods of settlement and 
domicile, in town and country; the political units of con- 
trol and administration; differentiation of functions be- 
tween industrial and other classes and groups ; ownership, 
its growth and distribution; social classes and associa- 
tions; business enterprise, industrial organisations and 
corporations. 

As regards the singleness of purpose with which Pro- 
fessor Schmoller has carried out the scheme of economic 
theory for which he has sketched the outlines and pointed 
the way, it is not possible to speak with the same confi- 
dence as of his preliminary work. It goes without saying 
that this further work of elaboration is excellent after its 
kind; and this excellence, which was to be looked for at 
Professor Schmoller’s hands, may easily divert the read- 


Gustav Schmoller’s Economics 269 


er’s attention from the shortcomings of the work in re- 
spect of kind rather than of quality. Now, while a broad 
generalisation on this head may be hazardous and is to be 
taken with a large margin, still, with due allowance, the 
following generalisation will probably stand, so far as 
regards this first volume. So long as the author is occu- 
pied with the life-history of institutions down to contem- 
porary developments, so long his discussion proceeds by 
the dry light of the scientific interest, simply, as the term 
“scientific” is understood among the modern adepts of 
the natural sciences; but so soon as he comes to close 
quarters with the situation of to-day, and reaches the 
point where a dispassionate analysis and exposition of 
the causal complex at work in contemporary institutional 
changes should begin, so soon the scientific light breaks 
up into all the colors of the rainbow, and the author 
becomes an eager and eloquent counselor, and argues the 
question of what ought to be and what modern society 
must do to be saved. The argument at this point loses 
the character of a genetic explanation of phenomena, and 
takes on the character of appeal and admonition, urged 
on grounds of expediency, of morality, of good taste, of 
hygiene, of political ends, and even of religion. All this, 
of course, is what we are used to in the common run of 
writers of the historical school; but those students whose 
interest centers in the science rather than in the ways and 
means of maintaining the received cultural forms of Ger- 
man society have long fancied they had ground to hope 
for something more to the purpose when Professor 
Schmoller came to put forth his great systematic work. 
Brilliant and no doubt valuable in its way and for its end, 
this digression into homiletics and reformatory advice 
means that the argument is running into the sands just at 
the stage where the science can least afford it. It is pre- 


EE 


270 Gustav Schmollers Economics 


cisely at this point, where men of less years and breadth 
and weight would find it difficult to hold tenaciously to the 
course of cause and effect through the maze of jarring — 
interests and sentiments that make up the contemporary | 
situation,— it is precisely at this point that a genetic — 
theory of economic life most needs the guidance of the 
firm, trained, dispassionate hand of the master. And at — 
this point his guidance all but fails us. 

What has just been said applies generally to Professor 
Schmoller’s treatment of contemporary economic develop- 
ment, and it should be added that it applies at nearly all 
points with more or less of qualification. But the qualifi- 
cations required are not large enough to belie the general 
characterisation just offered. It would be asking too 
large an indulgence to follow the point up in this place 
through all the discussions of the volume that fairly come 
under this criticism. ‘The most that may be done is to 
point for illustration to the handling which two or three 
of the social-economic “organs” receive. So, for in- 
stance, Book II. opens with an account of the family and — 
its place and function in the structure of economic society. 
The discussion proceeds along the beaten paths of ethno- 
graphic research, with repeated and well-directed recourse 
to the psychological knowledge that Professor Schmoller 
always has well in hand. Coming down into recent times, 
the discussion still proceeds to show how the large eco- 
nomic changes of late medizval and early modern times 
acted to break down the patriarchal régime of the earlier 
culture; but at the same time there comes into sight (pp. 
245-249) a bias in favor of the recent as against the ear- 
lier form of the household. The author is no longer con- 
tent to show the exigencies which set the earlier patri- 
archal household aside in favor of the modified patriar- 
chal household of more recent times. He also offers” 


Gustav Schmoller’s Economics 271 


reasons why the later, modified form is intrinsically the 
more desirable; reasons, it should perhaps be said, which 
may be well taken, but which are beside the point so far 
as regards a scientific explanation of the changes under 
discussion. | 
The closing paragraphs of the section (91) dwell with 
a kindly insistence on the many elements of strength and 
beauty possessed by the form of household organisation 
handed down from the past generation to the present. 
The facts herewith recited by the author are, no doubt, 
of weight, and must be duly taken account of by any 
economist who ventures on a genetic discussion of the 
present situation and the changing fortunes of the re- 
ceived household. But Professor Schmoller has failed 
even to point out in what manner these elements of 
strength and beauty have in the recent past or may in the 
present and immediate future causally affect the fortunes 
of the institution. The failure to turn the material in 
question to scientific account becomes almost culpable in 
Professor Schmoller, since there are few, if any, who are 
in so favorable a position to outline the argument which a 
theoretical account of the situation at this point must take. 
Plainly, as shown by Professor Schmoller’s argument, 
economic exigencies are working an incessant cumulative 
change in the form of organisation of the modern house- 
hold; but he has done little towards pointing out in what 
manner and with what effect these exigencies come into 
play. Neither has he gone at all into the converse ques- 
tion, equally grave as a question of economic theory, of 
how the persistence, even though qualified, of the patri- 
archal family has modified and is modifying economic 
structure and function at other points and qualifying or 
accentuating the very exigencies themselves to which the 
changes wrought in the institution are to be traced. 


272 Gustav Schmoller's Economics 


Plainly, too, the strength and beauty of the traditionally 
received form of ‘the household —that is to say, the 
habits of life and of complacency which are bound up 
with this household — are elements of importance in the 
modern situation as affects the degree of persistence and 
the direction of change which this institution shows under 
modern circumstances. They are psychological facts, 
facts of habit and propensity and spiritual fitness, the 
efficiency of which as live forces making for survival or 
variation is in this connection probably second to that of 
no other factors that could be named. We had, there- 
fore, almost a right to expect that Professor Schmoller’s 
profound and comprehensive erudition in the fields of 
psychology and cultural growth should turn these facts to — 
better ends than a preachment concerning an intrinsically 
desirable consummation. 

Regarding the present visible disintegration of the fam- — 
ily, and the closely related “ woman question,’ Professor 
Schmoller’s observations are of much the same texture. 
He notes the growing disinclination to the old-fashioned 
family life on the part of the working population, and — 
shows that there are certain economic causes for this 
growth or deterioration of sentiment. What he has to 
offer is made up of the commonplaces of latter-day social- 
economic discussion, and is charged with a strong under- 
tone of deprecation. What the trend of the causes at 
work to alter or fortify this body of sentiment may be, 
counts for very little in what he says on the present 
movement or on the immediate future of the institution. 
The best he has to offer on the “ woman question” is an 
off-hand reference of the ground of sentiment on which it 
rests to a recrudescence of the eighteenth century spirit of 
égalité. This notion of the equality of the sexes he re- 
futes in graceful and affecting terms, and he pleads for 


Gustav Schmoller’s Economics 273 


the unbroken preservation of woman’s sphere and man’s 
primacy ; as if the matter of superiority or inferiority be- 
tween the sexes could conceivably be anything more than 
a conventional outcome of the habits of life imposed 
upon the community by the circumstances under which 
they live. How it has come to pass that under the eco- 
nomic exigencies of the past the physical and tempera- 
mental diversity between the sexes has been convention- 
ally construed into a superiority of the man and an infe- 
riority of the woman,— on this head he has no more to 
say or to suggest than on the correlate question of why 
this conventional interpretation of the facts has latterly 
not been holding its ancient ground. The discussion of 
the family and of the relation of the sexes, in modern cul- 
ture, is marked throughout by unwillingness or inability 
to penetrate behind the barrier of conventional finality. 
The discussion of the family just cited occupies the 
opening chapter of Book II. For a further instance of 
Professor Schmoller’s handling of a modern economic 
problem, reference may be had to the closing chapter of 
Book I., on the ‘‘ Development of Technological Expedi- 
ents and its Economic Significance,” but more particu- 
larly the sections (84-860) on the modern machine indus- 
try (pp. 211-228). In this discussion, also, the point of 
interest is the attention given to the latter-day phenomena 
of machine industry, and the author’s method and animus 
in dealing with them. There is (pp. 211-218) a con- 
densed and competent presentation of the main charac- 
teristics of*the modern “machine age,” followed (pp. 
218-228) by a critical discussion of its cultural value. 
The customary eulogy, but with more than the customary 
discrimination, is given to the advantages of the régime 
of the machine in point of economy, creature comforts, 
and intellectual sweep; and it is pointed out how the ré- 


274: Gustav Schmoller’s Economics 


gime of the machine has brought about a redistribution of 
wealth and of population and a reorganisation and redis- 
tribution of social and economic structures and functions. 
It is pointed out (p. 223) that the gravest social effect of 
the machine industry has been the creation of a large class 
of wage laborers. The material circumstances into which 
this class has been thrown, particularly in point of physi- 
cal comfort, are dealt with in a sober and discriminating 
way ; and it is shown (p. 224) that in the days of its fuller 
development the machine’s régime has evolved a class of 
trained laborers who not only live in comfort, but are 
sound and strong in mind and body. But with the cita- 
tion of these facts the pursuit of the chain of cause and 
effect in this modern machine situation comes to an end, 
The remainder of the space given to the subject is occu- 
pied with extremely sane and well-advised criticism, 
moral and esthetic, and indications of what the proper 
ideals and ends of endeavor should be. 

Professor Schmoller misses the opportunity he here has 
of dealing with this material in a scientific spirit and with 
some valuable results for economic theory. He could, it 
is not too bold to assume, have sketched for us an effec- — 
tive method and line of research to be pursued, for in- 
stance, in following up the scientific question of what may ~ 
be the cultural, spiritual effects of the machine’s régime 
upon this large body of trained workmen, and what this 
body of trained workmen in its turn counts for as a factor 
in shaping the institutional growth of the present and the ~ 
economic and cultural situation of to-morrow. Work of — 
this kind, there is reason to believe, Professor Schmoller 
could have done with better effect than any of his col- 
leagues in the science; for he is, as already noticed above, 
possessed of the necessary qualifications in the way of 
psychological training, broad knowledge of the play of 


Gustav Schmoller’s Economics 275 


cause and effect in cultural growth, and an ability to take 
a scientific point of view. Instead of this he harks back 
again to the dreary homiletical waste of the traditional 
Historismus. It seems as if a topic which he deals with 
as an objective matter so long as it lies outside the sphere 
of every-day humanitarian and social solicitude, becomes 
a matter to be passed upon by conventional standards of 
taste, dignity, morality, and the like, so soon as it comes 
within the sweep of latter-day German sentiment. 

This habit of treating a given problem from these vari- 
ous and shifting points of view at times gives a kaleido- 
scopic effect that is not without interest. So in the mat- 
ter of the technically trained: working population in the 
machine industry, to which reference has already been 
made, something of an odd confusion appears when ex- 
pressions taken from diverse phases of the discussion are 
brought side by side. He speaks of this class at one point 
(p. 224) as “sound, strong, spiritually and morally ad- 
vancing,’ superior in all these virtues to the working 
classes of other times and places. At another point (pp. 
250-253) he speaks of the same popular element, under 
the designation of “ socialists,” as perverse, degenerate, 
and reactionary. This latter characterisation may be 
substantially correct, but it proceeds on grounds of taste 
and predilection, not on grounds of scientifically deter- 
minable cause and effect. And the two characterisations 
apply to the same elements of population; for the sub- 
stantial core and tone-giving factor of the radical social- 
istic element in the German community is, notoriously, 
just this technically trained population of the industrial 
towns where the discipline of the machine industry has 
been at work with least mitigation. The only other fairly 
isolable element of a radical socialistic complexion is 
found among the students of modern science. Now, fur- 


276 Gustav Schmoller's Economics 


—— oe St—‘C:* 


ther, in his speculations on the relation of technological 
knowledge to the advance of culture, Professor Schmoller — 
points out (e.g., p. 226) that a high degree of culture © 
connotes, on the whole, a high degree of technological 
efficiency, and conversely. In this connection he makes 
use of the terms Halbkulturvélker and Ganzkulturvolker 
to designate different degrees of cultural maturity. It is — 
curious to reflect, in the light of what he has to say on 
these several heads, that if the socialistically affected, 
technically trained population of the industrial towns, to- 
gether with the radical-socialistic men of science, were ab- 
stracted from the German population, leaving substan- — 
tially the peasantry, the slums, and the aristocracy great 
and small, the resulting German community would un-— 
questionably have to be classed as a Halbkulturvolk in 
Professor Schmoller’s scheme. Whereas the elements 
abstracted, if taken by themselves, would as unquestion- 
ably be classed among the Ganzkulturvolker. 

In conclusion, one may turn to the concluding chapter — 
(Book II., Chapter vii.) of the present volume for a final 
illustration of Professor Schmoller’s method and animus 
in handling a modern economic problem. All the more 
so as this chapter on business enterprise better sustains © 
that scientific attitude which the introductory outline leads - 
the reader to look for throughout. It shows how modern 
business enterprise is in the main an outgrowth of com- 
mercial activity, as also that it has retained the commercial 
spirit down to the present. The motive force of business 
enterprise is the self-seeking quest of dividends; but Pro- 
fessor Schmoller shows, with more dispassionate insight 
than many economists, that this self-seeking motive is 
hemmed in and guided at all points in the course of its 
development by considerations and conventions that are 
not of a primarily self-seeking kind. He is not content to 


Gustav Schmoller’'s Economics 277 


point to the beneficent working of a harmony of interests, 
but sketches the play of forces whereby a self-seeking 
business traffic has come to serve the interests of the com- 
munity. Business enterprise has gradually emerged and 
come into its present central and dominant position in the 
community’s industry as a concomitant of the growth of 
individual ownership and pecuniary discretion in modern 
life. It is therefore a phase of the modern cultural situa- 
tion; and its survival and the direction of its further 
growth are therefore conditioned by the exigencies of the 
modern cultural situation. What this modern cultural 
situation is and what are the forces, essentially psycho- 
logical, which shape the further growth of the situation, 
no one is better fitted to discuss than Professor Schmol- 
ler; and he has also given valuable indications (pp. 428- 
457) of what these factors are and how the inquiry into 
their working must be conducted. But even here, where 
a dispassionate tracing-out of the sequence of cause and 
effect should be easier to undertake, because less readily 
blurred with sentiment, than in the case, e.g., of the fam- 
ily, the work of tracing the developmental sequence tapers 
off into advice and admonition proceeding on the assump- 
tion that the stage now reached is, or at least should be, 
final. The attention in the later pages diverges from the 
process of growth and its conditioning circumstances, to 
the desirability of maintaining the good results attained 
and to the ways and means of holding fast that which is 
good in the outcome already achieved. The question to 
which an answer is sought in discussing the present phase 
of the development is not a question as to what is taking 
place as respects the institution of business enterprise, but 
rather a question as to what form should be given to an 
optimistic policy of fostering business enterprise and 
turning it to account for the common good. At this 


278 Gustav Schmoller’s Economics 


point, as elsewhere, though perhaps in a less degree than 
elsewhere, the existing form of the institution is accepted 
as a finality. All this is disappointing in view of the fact 
that at no other point do modern economic institutions 
bear less of an air of finality than in the forms and con- 
ventions of business organisations and relations. As 
Professor Schmoller remarks (p. 455), the scope and 
character of business undertakings necessarily conform to 
the circumstances of the time, not to any logical scheme 
of development from small to great or from simple to 
complex. So also, one might be tempted to say, the expe- 
diency and the chance of ultimate survival of business 
enterprise is itself an open question, to be answered by a | 
scrutiny of the forces that make for its survival or altera- 
tion, not by advice as to the best method of sustaining and 
controlling it. 


What has here been said in criticism of Professor 
Schmoller’s work, particularly as regards his departure 
from the path of scientific research in dealing with 
present-day phenomena, may, of course, have to be quali- 
fied, if not entirely set aside, when his work is completed 
with the promised genetic survey of modern institutions 
to be set forth in the concluding fourth book. Perhaps 
it may even be said that there is fair hope, on general 
grounds, of such a consummation ; but the present volume 
does not afford ground for a confident expectation of this 
kind. It is perhaps needless, perhaps gratuitous, to add 
that the strictures offered indicate, after all, but relatively 
slight shortcomings in a work of the first magnitude. 


INDUSTRIAL AND PECUNIARY EMPLOY- 
MENTS? 


For purposes of economic theory, the various activi- 
ties of men and things about which economists busy 
themselves were classified by the early writers according 
to a scheme which has remained substantially unchanged, 
if not unquestioned, since their time. This scheme is 
the classical three-fold division of the factors of produc- 
tion under Land, Labor, and Capital. The theoretical aim 
of the economists in discussing these factors and the ac- 
tivities for which they stand has not remained the same 
throughout the course of economic discussion, and the 
three-fold division has not always lent itself with facility 
to new points of view and new purposes of theory, 
but the writers who have shaped later theory have, on 
the whole, not laid violent hands on the sacred formula. 
These facts must inspire the utmost reserve and circum- 
spection in any one who is moved to propose even a 
subsidiary distinction of another kind between economic 
activities or agents. The terminology and the concept- 
ual furniture of economics are complex and parti-colored 
enough without gratuitous innovation. 

It is accordingly not the aim of this paper to set aside 
the time-honored classification of factors, or even to for- 
mulate an iconoclastic amendment, but rather to indi- 
cate how and why this classification has proved inade- 
quate for certain purposes of theory which were not con- 
templated by the men who elaborated it. To this end a 


1 Reprinted by permission from Publications of the American 
Economic Association, series 3, Vol. II. 
279 


280 Industrial and Pecuniary Employments | 


bit of preface may be in place as regards the aims which ~ 
led to its formulation and the uses which the three-fold _ : 
classification originally served. 


The economists of the late eighteenth and early nine- 
teenth centuries were believers in a Providential order, © 
or an order of Nature. How they came by this belief 
need not occupy us here; neither need we raise a ques- 
tion as to whether their conviction of its truth was well 
or ill grounded. The Providential order or order of Na- 
ture is conceived to work in an effective and just way 
toward the end to which it tends; and in the economic 
field this objective end is the material welfare of man- 
kind. The science of that time set itself the task of 
interpreting the facts with which it dealt, in terms of 
this natural order. The material circumstances which 
condition men’s life fall within the scope of this natural 
order of the universe, and as members of the universal 
scheme of things men fall under the constraining guid- 
ance of the laws of Nature, who does all things well. 
As regards their purely theoretical work, the early econ- 
omists are occupied with bringing the facts of economic 
life under natural laws conceived somewhat after the 
manner indicated ; and when the facts handled have been 
fully interpreted in the light of this fundamental postulate 
the theoretical work of the scientist is felt to have been 
successfully done. 

The economic laws aimed at and formulated under the 
guidance of this preconception are laws of what takes 
place “naturally” or “normally,” and it is of the es- 
sence of things so conceived that in the natural or nor- 
mal course there is no wasted or misdirected effort. The — 
standpoint is given by the material interest of mankind, — 
or, more concretely, of the community or “ society” 1 


Industrial and Pecuniary Employments 281 


which the economist is placed; the resulting economic 
theory is formulated as an analysis of the “natural” 
course of the life of the community, the ultimate theo- 
retical postulate of which might, not unfairly, be stated 
as in some sort a law of the conservation of economic 
energy. When the course of things runs off naturally 
or normally, in accord with the exigencies of human 
welfare and the constraining laws of nature, economic 
income and outgo balance one another. The natural 
forces at play in the economic field may increase indefi- 
nitely through accretions brought in under man’s domin- 
ion and through the natural increase of mankind, and, 
indeed, it is of the nature of things that an orderly 
progress of this kind should take place; but within the 
economic organism, as within the larger organism of 
the universe, there prevails an equivalence of expendi- 
ture and returns, an equilibrium of flux and reflux, 
which is not broken over in the normal course of things. 
So it is, by implication, assumed that the product which 
results from any given industrial process or operation is, 
in some sense or in some unspecified respect, the equiva- 
lent of the expenditure of forces, or of the effort, or what 
not, that has gone into the process out of which the 
product emerges. 

This theorem of equivalence is the postulate which 
lies at the root of the classical theory of distribution, 
but it manifestly does not admit of proof — or of disproof 
either, for that matter; since neither the economic forces 
which go into the process nor the product which emerges 
are, in the economic respect, of such a tangible charac- 
ter as to admit of quantitative determination. They are 
in fact incommensurable magnitudes. To this last re- 
mark the answer may conceivably present itself that the 
equivalence in question is an equivalence in utility or in 


282 Industrial and Pecuniary Employments : 


exchange value, and that the quantitative igen 
of the various items in terms of exchange value or of util- 
ity is, theoretically, not impossible; but when it is called 
to mind that the forces or factors which go to the pro- 
duction of a given product take their utility or exchange 
value from that of the product, it will easily be seen that 
the expedient will not serve. The equivalence between 
the aggregate factors of production in any given case 
and their product remains a dogmatic postulate whose 
validity cannot be demonstrated in any terms that will 
not reduce the whole proposition to an aimless fatuity, 
or to metaphysical grounds which have now been given 
up. 
The point of view from which the early, and even the 
later classical, economists discussed economic life was 
that of “the society” taken as a collective whole and 
conceived as an organic unit. Economic theory sought 
out and formulated the laws of the normal life of the 
social organism, as it is conceived to work out in that 
natural course whereby the material welfare of society 
is attained. The details of economic life are construed, 
for purposes of general theory, in terms of their sub- 
servience to the aims imputed to the collective life 
process. Those features of detail which will bear con 
struction as links in the process whereby the collective 
welfare is furthered, are magnified and brought into the 
foreground, while such features as will not bear this 
construction are treated as minor disturbances. Such 
a procedure is manifestly legitimate and expedient in a 
theoretical inquiry whose aim is to determine the laws 
of health of the social organism and the normal functions 
of this organism in a state of health. The social organ- 
ism is, in this theory, handled as an individual endowed 
with a consistent life purpose and something of an intelli- 


Industrial and Pecuniary Employments 283 


gent apprehension of what means will serve the ends 
which it seeks. With these collective ends the interests 
of the individual members are conceived to be funda- 
mentally at one; and, while men may not see that their 
own individual interests coincide with those of the social 
organism, yet, since men are members of the compre- 
hensive organism of nature and consequently subject to 
beneficent natural law, the ulterior trend of unrestrained 
individual action is, on the whole, in the right direction. 

The details of individual economic conduct and its 
consequences are of interest to such a general theory 
chiefly as they further or disturb the beneficent “ natu- 
ral” course. But if the aims and methods of individual 
conduct were of minor importance in such an economic 
theory, that is not the case as regards individual rights. 
The early political economy was not simply a formula- 
tion of the natural course of economic phenomena, but 
it embodied an insistence on what is called “natural 
liberty.” Whether this insistence on natural liberty is to 
be traced to utilitarianism or to a less specific faith in 
natural rights, the outcome for the purpose in hand is 
substantially the same. To avoid going too far afield, 
it may serve the turn to say that the law of economic 
equivalence, or conservation of economic energy, was, 
in early economics, backed by this second corollary of 
the order of nature, the closely related postulate of 
natural rights. The classical doctrine of distribution 
rests on both of these, and it is consequently not only a 
doctrine of what must normally take place as regards 
the course of life of society at large, but it also formu- 
lates what ought of right to take place as regards the 
remuneration for work and the distribution of wealth 
among men. 

Under the resulting natural-economic law of equiva- 


284 Industrial and Pecuniary Employments 


lence and equity, it is held that the several participants 
or factors in the economic process severally get the 
equivalent of the productive force which they expend. 
‘They severally get as much as they produce; and con- 
versely, in the normal case they seyerally produce as 
much as they get. In the earlier formulations, as, for 
example, in the authoritative formulation of Adam 
Smith, there is no clear or consistent pronouncement as 
regards the terms in which this equivalence between 
production and remuneration runs. With the later, 
classical economists, who had the benefit of a developed 
utilitarian philosophy, it seems to be somewhat consist- 
ently conceived in terms of an ill-defined serviceability. 
With some later writers it is an equivalence of exchange 
values; but as this latter reduces itself to tautology, it 
need scarcely be taken seriously. When we are told in 
the later political economy that the several agents or 
factors in production normally earn what they get, it is 
perhaps fairly to be construed as a claim that the eco- 
nomic service rendered the community by any one of 
the agents in production equals the service received by 
the agent in return. In terms of serviceability, then, if 
not in terms of productive force,” the individual agent, 
or at least the class or group of agents to which the in- 
dividual belongs, normally gets as much as he contrib- 
utes and contributes as much as he gets. This applies 
to all those employments or occupations which are ordi 
narily carried on in any community, throughout th 
aggregate of men’s dealings with the material means of 
life. All activity which touches industry comes in under 
this law of equivalence and equity. 


2Some late writers, as, e.g., J. B. Clark, apparently must be 
held to conceive the equivalence in terms of productive force rath 
than of serviceability; or, perhaps, in terms of serviceability o 
one side of the equation and productive force on the other. 


- 


Industrial and Pecuniary Employments 285 


Now, to a theorist whose aim is to find the laws gov- 
erning the economic life of a social organism, and who 
for this purpose conceives the economic community as 
a unit, the features of economic life which are of par- 
ticular consequence are those which show the correla- 
tion of efforts and the solidarity of interests. For this 
purpose, such activities and such interests as do not fit 
into the scheme of solidarity contemplated are of minor 
importance, and are rather to be explained away or con- 
strued into subservience to the scheme of solidarity 
than to be incorporated at their face value into the theo- 
retical structure. Of this nature are what are here to 
be spoken of under the term “ pecuniary employments,” 
and the fortune which these pecuniary employments 
have met at the hands of classical economic theory is 
such as is outlined in the last sentence. 

In a theory proceeding on the premise of economic 
solidarity, the important bearing of any activity that is 
taken up and accounted for, is its bearing upon the 
furtherance of the collective life process. Viewed from 
the standpoint of the collective interest, the economic 
process is rated primarily as a process for the provision 
of the aggregate material means of life. As a late rep- 
resentative of the classical school expresses it: ‘ Produc- 
tion, in fact, embraces every economic operation except 
consumption.” * It is this aggregate productivity, and the 
bearing of all details upon the aggregate productivity, 
that constantly occupies the attention of the classical 
economists. What partially diverts their attention from 
this central and ubiquitous interest, is their persistent lapse 
into natural-rights morality. 

The result is that acquisition is treated as a sub-head 


3jJ. B. Clark, The Distribution of Wealth, p. 20. 


286 Industrial and Pecuniary Employments 


under production, and effort directed to acquisition is 
construed in terms of production. The pecuniary ac- 
tivities of men, efforts directed to acquisition and opera- 
tions incident to the acquisition or tenure of wealth, are 
treated as incidental to the distribution to each of his par- 
ticular proportion in the production of goods. Pecuniary : 
activities, in short, are handled as incidental features of 
the process of social production and consumption, as 
details incident to the method whereby the social in- 
terests are served, instead of being dealt with as the 
controlling factor about which the modern economic proc- 
ess turns. 

Apart from the metaphysical tenets indicated above 
as influencing them, there are, of course, reasons of eco- 
nomic history for the procedure of the early economists 
in so relegating the pecuniary activities to the back- 
ground of economic theory. In the days of Adam Smith, 
for instance, economic life still bore much of the char- 
acter of what Professor Schmoller calls Stadtwirtschaft. 
This was the case to some extent in practice, but still 
more decidedly in tradition. To a greater extent than 
has since been the case, households produced goods for 
their own consumption, without the intervention of sale; 
and handicraftsmen still produced for consumption 
by their customers, without the intervention of a market. 
In a considerable measure, the conditions which 
the Austrian marginal-utility theory supposes, of a 
producing seller and a consuming buyer, actually pre- 
vailed. It may not be true that in Adam Smith’s time 
the business operations, the bargain and sale of goods, 
were, in general, obviously subservient to their produc- 
tion and consumption, but it comes nearer being true a 
that time than at any time since then. And the traditio 
having once been put into form and authenticated by 


Industrial and Pecuniary Employments 287 


Adam Smith, that such was the place of pecuniary 
transactions in economic theory, this tradition has lasted 
on in the face of later and further changes. Under the 
shadow of this tradition the pecuniary employments are 
still dealt with as auxiliary to the process of produc- 
tion, and the gains from such employments are still ex- 
plained as being due to a productive effect imputed to 
them. 

According to ancient prescription, then, all normal, le- 
gitimate economic activities carried on in a well regu- 
lated community serve a materially useful end, and so far 
as they are lucrative they are so by virtue of and in pro- 
portion to a productive effect imputed to them. But in 
the situation as it exists at any time there are activities 
and classes of persons which are indispensable to the 
community, or which are at least unavoidably present in 
modern economic life, and which draw some income from 
the aggregate product, at the same time that these activi- 
ties are not patently productive of goods and can not 
well be classed as industrial, in any but a highly sophisti- 
cated sense. Some of these activities, which are con- 
cerned with economic matters but are not patently of an 
industrial character, are integral features of modern eco- 
nomic life, and must therefore be classed as normal; 
for the existing situation, apart from a few minor discrep- 
ancies, is particularly normal in the apprehension of 
present-day economists. Now, the law of economic 
equivalence and equity says that those who normally re- 
ceive in income must perforce serve some productive 
end; and, since the existing organization of society is 
conceived to be eminently normal, it becomes imperative 
to find some ground on which to impute industrial pro- 
ductivity to those classes and employments which do not 
at first view appear to be industrial at all. Hence there 


288 Industrial and Pecuniary Employments 


is commonly visible in the classical political economy, an- 
cient and modern, a strong inclination to make the 
schedule of industrially productive employments very 
comprehensive ; so that a good deal of ingenuity has been 
spent in economically justifying their presence by speci- 
fying the productive effect of such non-industrial factors 
as the courts, the army, the police, the clergy, the school- 
master, the physician, the opera singer. 

But these non-economic employments are not so much 
to the point in the present inquiry; the point being 
employments which are unmistakably economic, but not 
industrial in the naive sense of the word industry, and 
which yield an income. 

Adam Smith analysed the process of industry in which 
he found the community of his time engaged, and found 
the three classes of agents or factors: Land, Labor, and 
Capital (stock). The productive factors engaged being 
thus determined, the norm of natural-economic equiva- 
lence and equity already referred to above, indicated 
what would be the natural sharers in the product. Later 
economists have shown great reserve about departing 
from this three-fold division of factors, with its correlated 
three-fold division of sharers of remuneration; appa-— 
rently because they have retained an instinctive, inde- 
feasible trust in the law of economic equivalence which — 
underlies it. But circumstances have compelled the 
tentative intrusion of a fourth class of agent and in- 
come. The undertaker and his income presently came to 
be so large and ubiquitous figures in economic life that 
their presence could not be overlooked by the most 
normalising economist. The undertaker’s activity has 
been interpolated in the scheme of productive factors, as 
a peculiar and fundamentally distinctive kind of labor, 
with the function of coordinating and directing industrial 


Industrial and Pecuniary Employments 289 


processes. Similarly, his income has been interpolated 
in the scheme of distribution, as a peculiar kind of 
wages, proportioned to the heightened productivity given 
the industrial process by his work.* His work is dis- 
cussed in expositions of the theory of production. In 
discussions of his functions and his income the point of 
the argument is, how and in what degree does his activity 
increase the output of goods, or how and in what de- 
gree does it save wealth to the community. Beyond his 
effect in enhancing the effective volume of the aggre- 
gate wealth the undertaker receives but scant attention, 
apparently for the reason that so soon as that point has 
been disposed of the presence of the undertaker and his 
income has been reconciled with the tacitly accepted 
natural law of equivalence between productive service 
and remuneration. The normal balance has been estab- 
lished, and the undertaker’s function has been justified 
and subsumed under the ancient law that Nature does 
all things well and equitably. 

This holds true of the political economy of our grand- 
fathers. But this aim and method of handling the phe- 
nomena of life for theoretical ends, of course, did not go 
out of vogue abruptly in the days of our grandfathers.® 
There is a large sufficiency of the like aim and animus 
in the theoretical discussions of a later time; but specif- 
ically to cite and analyse the evidence of its presence 


4The undertaker gets an income; therefore he must produce 
goods. But human activity directed to the production of goods 
is labor; therefore the undertaker is a particular kind of laborer. 
There is, of course, some dissent from this position. 

5 The change which has supervened as regards the habitual re- 
sort to a natural law of equivalence is in large part a change 
with respect to the degree of immediacy and “reality” imputed 
to this law, and to a still greater extent a change in the degree 
of overtness with which it is avowed. 


290 Industrial and Pecuniary Employments 


would be laborious, nor would it conduce to the general 
peace of mind. 

Some motion towards a further revision of the scheme 
is to be seen in the attention which has latterly been 
given to the function and the profits of that peculiar 
class of undertakers whom we call speculators. But — 
even on this head the argument is apt to turn on the 
question of how the services which the speculator is 
conceived to render the community are to be construed 
into an equivalent of his gains.® The difficulty of in- 
terpretation encountered at this point is considerable, 
partly because it is not quite plain whether the specu- 
lators as a class come out of their transactions with a net 
gain or with a net loss. A systematic net loss, or a no- 
profits balance, would, on the theory of equivalence, 
mean that the class which gets this loss or doubtful 
gain is of no service to the community ; yet we are, out of 
the past, committed to the view that the speculator is” 
useful — indeed economically indispensable —and shall 
therefore have his reward. In the discussions given to 
the speculator and his function some thought is com- 
monly given to the question of the “legitimacy ” of the 
speculator’s traffic. The legitimate speculator is held to 
earn his gain by services of an economic kind rendered 
the community. The recourse to this epithet, “legiti- 
mate,” is chiefly of interest as showing that the tacit 
postulate of a natural order is still in force. Legitimate 
are such speculative dealings as are, by the theorist, 
conceived to serve the ends of the community, while 


6 See, e.g., a paper by H. C. Emery in the Papers and Proceed- 
ings of the Twelfth Annual Meeting of the American Economic 
Association, on “The Place of the Speculator in the Theory of 
Distribution,” and more particularly the discussion following the - 


paper. 


| 


Industrial and Pecuniary Employments 291 


illegitimate speculation is that which is conceived to be 
disserviceable to the community. 

The theoretical difficulty about the speculator and his 
gains (or losses) is that the speculator ex professo is 
quite without interest in or connection with any given 
industrial enterprise or any industrial plant. He is, in- 
dustrially speaking, without visible means of support. 
He may stake his risks on the gain or on the loss of the 
community with equal chances of success, and he may 
shift from one side to the other without winking. 

The speculator may be treated as an extreme case of 
undertaker, who deals exclusively with the business 
side of economic life rather than with the industrial 
side. But he differs in this respect from the common 
run of business men in degree rather than in kind. His 
traffic is a pecuniary traffic, and it touches industry only 
remotely and uncertainly; while the business man as 
commonly conceived is more or less immediately inter- 
ested in the successful operation of some concrete indus- 
trial plant. But since the undertaker first broke into 
economic theory, some change has also taken place as re- 
gards the immediacy of the relations of the common run 
of undertakers to the mechanical facts of the industries 
in which they are interested. Half a century ago it 
was still possible to construe the average business mana- 
ger in industry as an agent occupied with the superin- 
tendence of the mechanical processes involved in the 
production of goods or services. But in the later de- 
velopment the connection between the business manager 
and the mechanical processes has, on an average, grown 
more remote; so much so, that his superintendence of the 
plant or of the processes is frequently visible only to the 
scientific imagination. That activity by virtue of which 
the undertaker is classed as such makes him a business- 


292 Industrial and Pecumary Employments 


man, not a mechanic or foreman of the shop. His super- 
intendence is a superintendence of the pecuniary affairs 
of the concern, rather than of the industrial plant; espe- 
cially is this true in the higher development of the mod- 
ern captain of industry. As regards the nature of the 
employment which characterises the undertaker, it is 
possible to distinguish him from the men who are me- 
chanically engaged in the production of goods, and to — 
say that his employment is of a business or pecuniary 
kind, while theirs is of an industrial or mechanical kind. 
It is not possible to draw a similar distinction between the 
undertaker who is in charge of a given industrial con- 
cern, and the business man who is in business but is not 
interested in the production of goods or services. As 
regards the character of employment, then, the line falls — 
not between legitimate and illegitimate pecuniary trans- 
actions, but between business and industry. 

The distinction between business and industry has, of 
course, been possible from the beginning of economic 
theory, and, indeed, the distinction has from time to 
time temporarily been made in the contrast frequently 
pointed out between the proximate interest of the busi- 
ness man and the ulterior interest of society at large. 
What appears to have hindered the reception of the dis- 
tinction into economic doctrine, is the constraining pres- 
ence of a belief in an order of Nature and the habit of 
conceiving the economic community as an organism. The 
point of view given by these postulates has made such a 
distinction between employments not only useless, but 
even disserviceable for the ends to which theory has been 
directed. But the fact has come to be gradually more 
and more patent that there are constantly, normally pres- 
ent in modern economic life an important range of activi- 
ties and classes of persons who work for an income but 


Industrial and Pecuniary Employments 293 


of whom it cannot be said that they, either proximately 
or remotely, apply themselves to the production of goods. 
Their services, proximate or remote, to society are often 
of quite a problematical character. They are ubiquitous, 
and it will scarcely do to say that they are anomalous, for 
they are of ancient prescription, they are within the law 
and within the pale of popular morals. 

Of these strictly economic activities that are lucrative 
without necessarily being serviceable to the community, 
the greater part are to be classed as “business.” Per- 
haps the largest and most obvious illustration of these 
legitimate business employments is afforded by the specu- 
lators in securities. By way of further illustration may 
be mentioned the extensive and varied business of real- 
estate men (land-agents) engaged in the purchase and 
sale of property for speculative gain or for a com- 
mission; so, also, the closely related business of pro- 
moters and boomers of other than real-estate ventures; as 
also attorneys, brokers, bankers, and the like, although 
the work performed by these latter will more obviously 
bear interpretation in terms of social serviceability. The 
traffic of these business men shades off insensibly from 
that of the bona fide speculator who has no ulterior end 
of industrial efficiency to serve, to that of the captain of 
industry or entrepreneur as conventionally set forth in 
the economic manuals. 

The characteristic in which these business employ- 
ments resemble one another, and in which they differ 
from the mechanical occupations as well as from other 
non-economic employments, is that they are concerned 
primarily with the phenomena of value — with exchange 
or market values and with purchase and sale — and only 
indirectly and secondarily, if at all, with mechanical 
processes. What holds the interest and guides and shiits 


294 Industrial and Pecuniary Employments 


the attention of men within these employments is the 
main chance. These activities begin and end within 
what may broadly be called “ the higgling of the market.” 
Of the industrial employments, in the stricter sense, it~ 
may be said, on the other hand, that they begin and” 
end outside the higgling of the market. Their proximate — 
aim and effect is the shaping and guiding of material - 
things and processes. Broadly, they may be said to be 
primarily occupied with the phenomena of material 
serviceability, rather than with those of exchange value. — 
They are taken up with phenomena which make the 
subject matter of Physics and the other material 
sciences. f 
The business man enters the economic life process — 
from the pecuniary side, and so far as he works an effect © 
in industry he works it through the pecuniary disposi-_ 
tions which he makes. He takes thought most immedi- _ 
ately of men’s convictions regarding market values; and 
his efforts as a business man are directed to the apprehen- 
sion, and commonly also to the influencing of men’s 
beliefs regarding market values. The objective point of ‘ 
business is the diversion of purchase and sale into some 
particular channel, commonly involving a diversion from 
other channels. The laborer and the man engaged in 
directing industrial processes, on the other hand, enter 
the economic process from the material side; in their 
characteristic work they take thought most immediately 
of mechanical effects, and their attention is directed tol 
turning men and things to account for the compassing of — 
some material end. The ulterior aim, and the ulterior 
effect, of these industrial employments may be some pe-_ 
cuniary result; work of this class commonly results ial 
an enhancement, or at least an alteration, of market 
values. Conversely, business activity may, and in a mall 


| 


Industrial and Pecuniary Employments 295 


jority of cases it perhaps does, effect an enhancement of 
the aggregate material wealth of the community, or the 
aggregate serviceability of the means at hand; but such 
an industrial outcome is by no means bound to follow 
from the nature of the business man’s work. 

From what has just been said it appears that, if we re- 
tain the classical division of economic theory into Pro- 
duction, Distribution, and Consumption, the pecuniary 
employments do not properly fall under the first of these 
divisions, Production, if that term is to retain the 
meaning commonly assigned to it. In an earlier and 
less specialised organisation of economic life, particu- 
larly, the undertaker frequently performs the work of a 
foreman or a technological expert, as well as the work 
of business management. Hence in most discussions of 
his work and his theoretical relations his occupation is 
treated as a composite one. The technological side of 
his composite occupation has even given a name to his 
gains (wages of superintendence), as if the undertaker 
were primarily a master-workman. The distinction at 
this point has been drawn between classes of persons in- 
stead of between classes of employments; with the re- 
sult that the evident necessity of discussing his tech- 
nological employment under production has given counte- 
nance to the endeavor to dispose of the undertaker’s busi- 
ness activity under the same head. This endeavor has, 
of course, not wholly succeeded. 

In the later development, the specialisation of work 
in the economic field has at this point progressed so far, 
and the undertaker now in many cases comes so near 
being occupied with business affairs alone, to the exclu- 
sion of technological direction and supervision, that, 
with this object lesson before us, we no longer have the 
same difficulty in drawing a distinction between busi- 


| 


296 Industrial and Pecuniary Employments | 
; 

ness and industrial employments. And even in the earlier 
days of the doctrines, when the aim was to dispose of 
the undertaker’s work under the theoretical head of Pro- 
duction, the business side of his work persistently ob- 
truded itself for discussion in the books and chapters. 
given to Distribution and Exchange. The course taken 
by the later theoretical discussion of the entrepreneur, 
leaves no question but that the characteristic fact about 
his work is that he is a business man, occupied avith pe- 
cuniary affairs. 
Such pecuniary employments, of which the purely 
fiscal or financiering forms of business are typical, are 
nearly all and nearly throughout, conditioned by the in 
stitution of property or ownership — an institution which, 
as John Stuart Mill remarks, belongs entirely within 
the theoretical realm of Distribution. Ownership, no 
doubt, has its effect upon productive industry, and, in- 
deed, its effect upon industry is very large, both in scope 
and range, even if we should not be prepared to go the 
length of saying that it fundamentally conditions all in- 
dustry ; but ownership is not itself primarily or immedi 
ately a contrivance for production. Ownership directly 
touches the results of industry, and only indirectly the 
methods and processes of industry. If the institution of 
property be compared with such another feature of our 
culture, for instance, as the domestication of plants 
or the smelting of iron, the meaning of what has just 
been said may seem clearer. 
So much then of the business man’s activity as is con- 
ditioned by the institution of property, is not to be 
classed, in economic theory, as productive or industrial 
activity at all. Its objective point is an alteration of the 
distribution of wealth. His business is, essentially, to 
sell and buy — sell in order to buy cheaper, buy in order 


Industrial and Pecuniary Employments 297 


to sell dearer.’ It may or may not, indirectly, and in a 
sense incidentally, result in enhanced production. The 
business man may be equally successful in his enter- 
prise, and he may be equally well remunerated, whether 
his activity does or does not enrich the community. 
Immediately and directly, so long as it is confined to the 
pecuniary or business sphere, his activity is incapable of 
enriching or impoverishing the community as a whole 
except, after the fashion conceived by the mercantilists, 
through his dealings with men of other communities. 
The circulation and distribution of goods incidental to the 
business man’s traffic is commonly, though not always or 
in the nature of the case, serviceable to the community ; 
but the distribution of goods is a mechanical, not a pe- 
cuniary transaction, and it is not the objective point of 
business nor its invariable outcome. From the point of 
view of business, the distribution or circulation of goods 
is a means of gain, not an end sought. 

It is true, industry is closely conditioned by business. 
In a modern community, the business man finally de- 
cides what may be done in industry, or at least in the 
greater number and the more conspicuous branches of 
industry. This is particularly true of those branches that 
are currently thought of as peculiarly modern. Under 
existing circumstances of ownership, the discretion in 
economic matters, industrial or otherwise, ultimately rests 
in the hands of the business men. It is their business to 
have to do with property, and property means the discre- 
tionary control of wealth. In point of character, scope 
and growth, industrial processes and plants adapt them- 
selves to the exigencies of the market, wherever there is 
a developed market, and the exigencies of the market 
are pecuniary exigencies. The business man, through his 


7 Cf. e.g., Marx, Capital, especially bk. 1, ch. Iv. 


298 Industrial and Pecumary Employments 


pecuniary dispositions, enforces his choice of what in- 
dustrial processes shall be in use. He can, of course, 
not create or initiate methods or aims for industry; if 
he does so he steps out of the business sphere into the 
material domain of industry. But he can decide whether 
and which of the known processes and industrial arts shall 
be practiced, and to what extent. Industry must be con- 
ducted to suit the business man in his quest for gain; 
which is not the same as saying that it must be conducted 
to suit the needs or the convenience of the community at 
large. Ever since the institution of property was defi- 
nitely installed, and in proportion as purchase and sale 
has been practiced, some approach has been made to a 
comprehensive system of control of industry by pe- 
cuniary transactions and for pecuniary ends, and the in- 
dustrial organisation is nearer such a consummation now 
than it ever has been. For the great body of modern in- 
dustry the final term of the sequence is not the produc 
tion of the goods but their sale; the endeavor is not so 
much to fit the goods for use as for sale. It is well known 
that there are many lines of industry in which the cost of 
marketing the goods equals the cost of making and trans- 
porting them. 

Any industrial venture which falls short in meeti 
the pecuniary exigencies of the market declines and 
yields ground to others that meet them with better effect. 
Hence shrewd business management is a requisite to suc- 
cess in any industry that is carried on within the scope of 
the market. Pecuniary failure carries with it industrial 
failure, whatever may be the cause to which the pecuniary ' 
failure is due— whether it be inferiority of the goods 
produced, lack of salesmanlike tact, popular prejudice, 
scanty or ill-devised advertising, excessive truthfulness, 
or what not. In this way industrial results are closely 


Sa 


Industrial and Pecuniary Employments 299 


dependent upon the presence of business ability ; but the 
cause of this dependence of industry upon business in a 
given case is to be sought in the fact that other rival ven- 
tures have the backing of shrewd business management, 
rather than in any help which business management in the 
aggregate affords to the aggregate industry of the com- 
munity. Shrewd and farsighted business management is 
a requisite of survival in the competitive pecuniary strug- 
gle in which the several industrial concerns are engaged, 
because shrewd and farsighted business management 
abounds and is employed by all the competitors. The 
ground of survival in the selective process is fitness for 
pecuniary gain, not fitness for serviceability at large. Pe- 
cuniary management is of an emulative character and 
gives, primarily, relative success only. If the change 
were equitably distributed, an increase or decrease of the 
aggregate or average business ability in the community 
need not immediately affect the industrial efficiency or 
the material welfare of the community. The like can not 
be said with respect to the aggregate or average in- 
dustrial capacity of the men at work. The latter are, 
on the whole, occupied with production of goods; the 
business men, on the other hand, are occupied with the 
acquisition of them. 

Theoreticians who are given to looking beneath the 
facts and to contemplating the profounder philosophical 
meaning of life speak of the function of the undertaker 
as being the guidance and coordination of industrial 


| processes with a view to economies of production. No 


doubt, the remoter effect of business transactions often 
is such coordination and economy, and, no doubt also, 
the undertaker has such economy in view and is stimu- 
lated to his maneuvers of combination by the knowl- 
edge that certain economies of this kind are feasible and 


300 Industrial and Pecuniary Employments 


will inure to his gain if the proper business arrangements 
can be effected. But it is practicable to class even this 
indirect furthering of industry by the undertaker as a 
permissive guidance only. The men in industry must 
first create the mechanical possibility of such new and | 
more economical methods and arrangements, before the 
undertaker sees the chance, makes the necessary business 
arrangements, and gives directions that the more effective 
working arrangements be adopted. 

It is notorious, and it is a matter upon which men 
dilate, that the wide and comprehensive consolidations 
and coordinations of industry, which often add so greatly 
to its effectiveness, take place at the initiative of the 
business men who are in control. It should be added — 
that the fact of their being in control precludes such 
coordination from being effected except by their advice © 
and consent. And it should also be added, in order to — 
a passably complete account of the undertaker’s function, 
that he not only can and does effect economising co- — 
ordinations of a large scope, but he also can and does at — 
times inhibit the process of consolidation and coordina- 
tion. It happens so frequently that it might fairly be — 
said to be the common run that business interests and 
undertaker’s maneuvers delay consolidation, combina- 
tion, coordination, for some appreciable time after they 
have become patently advisable on industrial grounds. 
The industrial advisability or practicability is not the de-— 
cisive point. Industrial advisability must wait on the — 
eventual convergence of jarring pecuniary interests and 
on the strategical moves of business men playing for 
position. 

Which of these two offices of the business man in ~ 
modern industry, the furthering or the inhibitory, has 
the more serious or more far-reaching consequences is, 


ie ee 


Industrial and Pecuniary Employments 301 


on the whole, somewhat problematical. The furtherance 
of coordination by the modern captain of industry bulks 
large in our vision, in great part because the process of 
widening coordination is of a cumulative character. 
After a given step in coordination and combination has 
been taken, the next step takes place on the basis of the 
resulting situation. Industry, that is to say the working 
force engaged in industry, has a chance to develop new 
and larger possibilities to be taken further advantage of. 
In this way each successive move in the enhancement of 
the efficiency of industrial processes, or in the widening of 
coordination in industrial processes, pushes the captain 
of industry to a further concession, making possible a still 
farther industrial growth. But as regards the under- 
taker’s inhibitory dealings with industrial codrdination 
the visible outcome is not so striking. The visible out- 
come is simply that nothing of the kind then takes place 
in the premises. The potential cumulative sequence is 
cut off at the start, and so it does not figure in our ap- 
praisement of the disadvantage incurred. The loss does 
not commonly take the more obtrusive form of an ab- 
solute retreat, but only that of a failure to ad- 
vance where the industrial situation admits of an ad- 
vanice. 

It is, of course, impracticable to foot up and compare 
gain and loss in such a case, where the losses, being of 
the nature of inhibited growth, cannot be ascertained. 
But since the industrial serviceability of the captain of 
industry is, on the whole, of a problematical complexion, 
it should be advisable for a cautious economic theory 
not to rest its discussion of him on his serviceability.® 

8It is not hereby intended to depreciate the services rendered 


the community by the captain of industry in his management of 
business. Such services are no doubt rendered and are also no 


302 Industrial and Pecuniary Employments 


It*appears, then, as all economists are no doubt aware, 
that there is in modern society a considerable range of 


doubt of substantial value. Still less is it the intention to decry 
the pecuniary incentive as a motive to thrift and diligence. It 
may well be that the pecuniary traffic which we call business is 
the most effective method of conducting the industrial policy of 
the community; not only the most effective that has been con- 
trived, but perhaps the best that can be contrived. But that is a 
matter of surmise and opinion. In a matter of opinion on a 
point that can not be verified, a reasonable course is to say that 
the majority are presumably in the right. But all that is beside 
the point. However probable or reasonable such a view may be, 
it can find no lodgment in modern scientific theory, except as a 
corollary of secondary importance. Nor can scientific theory build 
upon the ground it may be conceived to afford. Policy may so 
build, but science can not. Scientific theory is a formulation of 
the laws of phenomena in terms of the efficient forces at work in 
the sequence of phenomena. So long as (under the old dispen- 
sation of the order of nature) the animistically conceived natural 
laws, with their God-given objective end, were considered to ex- 
ercise a constraining guidance over the course of events whereof 
they were claimed to be laws, so long it was legitimate scientific 
procedure for economists to formulate their theory in terms of 
these laws of the natural course; because so long they were 
speaking in terms of what was, to them, the efficient forces at 
work. But so soon as these natural laws were reduced to the 
plane of colorless empirical generalization as to what commonly 
happens, while the efficient forces at work are conceived to be of 
quite another cast, so soon must theory abandon the ground of 
the natural course, sterile for modern scientific purposes, and 
shift to the ground of the causal sequence, where alone it will 
have to do with the forces at work as they are conceived in our 
time. The generalisations regarding the normal course, as “ nor- 
mal” has been defined in economics since J. S. Mill, are not of 
the nature of theory, but only rule-of-thumb. And the talk 
about the “function” of this and that factor of production, etc., 
in terms of the collective life purpose, goes to the same limbo; 
since the collective life purpose is no longer avowedly conceived 
to cut any figure in the every-day guidance of economic activities 
or the shaping of economic results. 

The doctrine of the social-economic function of the undertaker 
may for the present purpose be illustrated by a supposititious par- 
allel from Physics. It is an easy generalisation, which will 
scarcely be questioned, that, in practice, pendulums commonly 


— T ” -- 


— 


Industrial and Pecuniary Employments 303 


activities, which are not only normally present, but which 
constitute the vital core of our economic system; which 
are not directly concerned with production, but 
which are nevertheless lucrative. Indeed, the group 
comprises most of the highly remunerative employments 
in modern economic life. The gains from these employ- 
ments must plainly be accounted for on other grounds 
than their productivity, since they need have no pro- 
ductivity. 

But it is not only as regards the pecuniary employ- 
ments that productivity and remuneration are constitu- 
tionally out of touch. It seems plain, from what has 
already been said, that the like is true for the remunera- 
tion gained in the industrial employments. Most wages, 
particularly those paid in the industrial employments 
proper, as contrasted with those paid for domestic or 
personal service, are paid on account of pecuniary serv- 
iceability to the employer, not on grounds of material 
serviceability to mankind at large. The product is 
valued, sought and paid for on account of and in some 
proportion to its vendibility, not for more recondite rea- 


vibrate in a plane approximately parallel with the nearest wall 
of the clock-case in which they are placed. The normality of this 
parallelism is fortified by the further observation that the vibra- 
tions are also commonly in a plane parallel with the nearest wall 
of the room; and when it is further called to mind that the bal- 
ance which serves the purpose of a pendulum in watches sim- 
ilarly vibrates in a plane parallel with the walls of its case, the 
absolute normality of the whole arrangement is placed beyond 
question. It is true, the parallelism is not claimed to be related 
to the working of the pendulum, except as a matter of fortuitous 
convenience; but it should be manifest from the generality of 
the occurrence that in the normal case, in the absence of disturb- 
ing causes, and in the long run, all pendulums will “naturally” 
tend to swing in a plane faultlessly parallel with the nearest wall. 
The use which has been made of the “organic concept,” in 
economics and in social science at large, is fairly comparable with 
this supposititious argument concerning the pendulum. 


304 Industrial and Pecuniary Employments 


sons of ulterior human welfare at large. It results that 
there is no warrant, in general theory, for claiming that 
the work of highly paid persons (more particularly that 
of highly paid business men) is of greater substantial 
use to the community than that of the less highly paid. 
At the same time, the reverse could, of course, also not 
be claimed. Wages, resting on a pecuniary basis, afford 
no consistent indication of the relative productivity of 
the recipients, except in comparisons between persons 
or classes whose products are identical except in amount, 
— that is to say, where a resort to wages as an index of 
productivity would be of no use anyway.® 


A result of the acceptance of the theoretical distinc- 
tion here attempted between industrial and pecuniary 
employments and an effective recognition of the pecu- 
niary basis of the modern economic organisation would 
be to dissociate the two ideas of productivity and re- 
muneration. In mathematical language, remuneration 
could no longer be conceived and handled as a “ func- 
tion” of productivity,— unless productivity be taken to 
mean pecuniary serviceability to the person who pays 
the remuneration. In modern life remuneration is, in 
the last analysis, uniformly obtained by virtue of an 
agreement between individuals who commonly proceed 
on their own interest in point of pecuniary gain. The 
remuneration may, therefore, be said to be a “ function ” 


of the pecuniary service rendered the person who grants 


® Since the ground of payment of wages is the vendibility of the 
product, and since the ground of a difference in wages is the dif- 
ferent vendibility of the product acquired through the purchase — 
of the labor for which the wages are paid, it follows that wher- — 
ever the difference in vendibility rests on a difference in the mag- — 
nitude of the product alone, there wages should be somewhat in © 
proportion to the magnitude of the product. 


Industrial and Pecuniary Employments 305 


the remuneration; but what is pecuniarily serviceable to 
the individual who exercises the discretion in the matter 
need not be productive of material gain to the community 
as a whole. Nor does the algebraic sum of individual 
pecuniary gains measure the aggregate serviceability of 
the activities for which the gains are got. 

In a community organized, as modern communities 
are, on a pecuniary basis, the discretion in economic 
matters rests with the individuals, in severalty; and the 
aggregate of discrete individual interests nowise ex- 
presses the collective interest. Expressions constantly 
recur in economic discussions which imply that the trans- 
actions discussed are carried out for the sake of the col- 
lective good or at the initiative of the social organ- 
ism, or that “society” rewards so and so for their 
services. Such expressions are commonly of the nature 
of figures of speech and are serviceable for homiletical 
rather than for scientific use. They serve to express 
their user’s faith in a beneficent order of nature, rather 
than to convey or to formulate information in regard to 
facts. 

Of course, it is still possible consistently to hold that 
there is a natural equivalence between work and its re- 
ward, that remuneration is naturally, or normally, or in 
the long run, proportioned to the material service ren- 
dered the community by the recipient; but that proposi- 
tion will hold true only if “natural” or ‘‘ normal” be 
taken in such a sense as to admit of our saying that the 
natural does not coincide with the actual; and it must be 
recognised that such a doctrine of the “ natural” appor- 
tionment of wealth or of income disregards the efficient 
facts of the case. Apart from effects of this kind in 
the way of equitable arrangements traceable to grounds 
of sentiment, the only recourse which modern science 


306 Industrial and Pecuniary Employments 


would afford the champion of a doctrine of natural dis- 
tribution, in the sense indicated, would be a doctrine of 
natural selection; according to which all disserviceable 
or unproductive, wasteful employments would, perforce, 
be weeded out as being incompatible with the continued 
life of any community that tolerated them. But such a 
selective elimination of unserviceable or wasteful em- — 
ployments would presume the following two conditions, 
neither of which need prevail: (1) It must be assumed 
that the disposable margin between the aggregate pro- 
ductivity of industry and the aggregate necessary con- 
sumption is so narrow as to admit of no appreciable 
waste of energy or of goods; (2) it must be assumed that 
no deterioration of the condition of society in the eco- 
nomic respect does or can “ naturally” take place. As 
to the former of these two assumptions, it is to be said 
that in a very poor community, and under exceptionally 
hard economic circumstances, the margin of production 
may be as narrow as the theory would require. Some- 
thing approaching this state of things may be found, 
for instance, among some Eskimo tribes. But in a 
modern industrial community — where the margin of ad- 
missible waste probably always exceeds fifty per cent. of 
the output of goods — the facts make no approach to the 
hypothesis. The second assumed condition is, of course, 
the old-fashioned assumption of a beneficent, providential — 
order or meliorative trend in human affairs. As such, 
it needs no argument at this day. Instances are not far 
to seek of communities in which economic deterioration 
has taken place while the system of distribution, both 
of income and of accumulated wealth, has remained on 
a pecuniary basis. 


To return to the main drift of the argument. The 


Industrial and Pecuniary Employments 307 


pecuniary employments have to do with wealth in point 
of ownership, with market values, with transactions of 
exchange, purchase and sale, bargaining for the purpose 
of pecuniary gain. These employments make up the 
characteristic occupations of business men, and the gains 
of business are derived from successful endeavors of the 
pecuniary kind. These business employments are the 
characteristic activity (constitute the “ function”) of 
what are in theory called undertakers. The dispositions 
which undertakers, qua business men, make are pecuni- 
ary dispositions — whatever industrial sequel they may 
or may not have —and are carried out with a view to 
pecuniary gain. The wealth of which they have the 
discretionary disposal may or may not be in the form of 
“production goods”; but in whatever form the wealth 
in question is conceived to exist, it is handled by the 
undertakers in terms of values and is disposed of by 
themyin the pecuniary respect. When, as may happen, 
the undertaker steps down from the pecuniary plane and 
directs the mechanical handling and functioning of 
“ produttion goods,” he becomes for the time a foreman. 
The undertaker, if his business venture is of the indus- 
trial kind, of course takes cognizance of the aptness of a 
given industrial method or process for his purpose, and 
he has to choose between different industrial processes 
in which to invest his values; but his work as under- 
taker, simply, is the investment and shifting of the values 
under his hand from the less to the more gainful point 
of investment. When the investment takes the form 
of material means of industry, or industrial plant, the 
sequel of a given business transaction is commonly 
some particular use of such means; and when such in- 
dustrial use follows, it commonly takes place at the 
hands of other men than the undertaker, although it 


308 Industrial and Pecumary Employments 


takes place within limits imposed by the pecuniary exi- 
gencies of which the undertaker takes cognizance. 
Wealth turned to account in the way of investment or 
business management may or may not, in consequence, 
be turned to account, materially, for industrial effect. . 
Wealth, values, so employed for pecuniary ends is capi- 

tal in the business sense of the word.?® Wealth, mate- 

rial means of industry, physically employed for indus- 

trial ends is capital in the industrial sense. Theory, 

therefore, would require that care be taken to distinguish 

between capital as a pecuniary category, and capital as 

an industrial category, if the term capital is retained 

to cover the two concepts.*1 The distinction here made 

substantially coincides with a distinction which many 

late writers have arrived at from a different point of 
approach and have, with varying success, made use of 

under different terms.*? 

A further corollary touching capital may be ae 
out. The gains derived from the handling of capital in 
the pecuniary respect have no immediate relation, stand 
in no necessary relation of proportion, to the productive 
effect compassed by the industrial use of the material 


10 All wealth so used is capital, but it does not follow that all 
pecuniary capital is social wealth. 

11—In current theory the term capital is used in these two 
senses; while in business usage it is employed pretty consistently 
in the former sense alone. The current ambiguity in the term 
capital has often been adverted to by economists, and there may 
be need of a revision of the terminology at this point; but this 
paper is not concerned with that question. P 

12 Professor Fetter, in a recent paper (Quarterly Journal of 
Economics, November, 1900) is, perhaps, the writer who has gone 
the farthest in this direction in the definition of the capital con- 
cept. Professor Fetter wishes to confine the term capital to 
pecuniary capital, or rather to such pecuniary capital as is based 
on the ownership of material goods. The wisdom of such 4 
terminological expedient is, of course, not in question here. 


Industrial and Pecuniary Employments 309 


means over which the undertaker may dispose; although 
the gains have a relation of dependence to the effects 
achieved in point of vendibility. But vendibility need 
not, even approximately, coincide with serviceability, 
except serviceability be construed in terms of marginal 
utility or some related conception, in which case the 
outcome is a tautology. Where, as in the case commonly 
assumed by economists as typical, the investing under- 
taker seeks his gain through the production and sale of 
some useful article, it is commonly also assumed that 
his effort is directed to the most economical production 
of as large and serviceable a product as may be, or at 
least it is assumed that such production is the outcome 
of his endeavors in the natural course ot things. This 
account of the aim and outcome of business enterprise 
may be natural, but it does not describe the facts. The 
facts being, of course, that the undertaker in such a 
case seeks to produce economically as vendible a pro- 
duct as may be. In the common run vendibility de- 
pends in great part on the serviceability of the goods, 
but it depends also on severai other circumstances ; and 
to that highly variable, but aearly always considerable 
extent to which vendibility depends on other circum- 
stances than the material serviceability of the goods, 
the pecuniary management of capital must be held not 
to serve the ends of production. Neither immediately, 
in his purely pecuniary traffic, nor indirectly, in the 
business guidance of industry through his pecuniary 
traffic, therefore, can the undertaker’s dealings with his 
pecuniary capital be accounted a productive occupation, 
nor can the gains of capital be taken to mark or to meas- 
use the productivity due to the investment. The “ cost 
of production” of goods in the case contemplated is to 
an appreciable, but indeterminable, extent a cost 


310 Industrial and Pecumary Employments 
of production of vendibility—an outcome which ial 
often of doubtful service to the body of consumers, 
and which often’ counts in the aggregate as waste. 
The material serviceability of the means employed 
in industry, that is to’ say the functioning of in- 
dustrial capital in the service of the community at 
large, stands in no necessary or consistent relation to 
the gainfulness of capital in the pecuniary respect. Pro-— 
ductivity can accordingly not be predicated of pecuniary 
capital. It follows that productivity theories of interest 
should be as difficult to maintain as productivity theo- 
ries of the gains of the pecuniary employments, the two 
resting on the same grounds. 

It is, further, to be remarked that pecuniary capital 
and industrial capital do not coincide in respect of the 
concrete things comprised under each. From this and 
from the considerations already indicated above, it fol- 
lows that the magnitude of pecuniary capital may vary 
independently of variations in the magnitude of indus- 
trial capital— not indefinitely,. perhaps, but within a 
range which, in its nature, is indeterminate. Pecuniary 
capital is a matter of market values, while industrial cap- 
ital is, in the last analysis, a matter of mechanical 
efficiency, or rather of mechanical effects not reducible to 
a common measure or a collective magnitude. So far as 
the latter may be spoken of as a homogenous ag- 
gregate — itself a doubtful point at best — the two cate- 
gories of capital are disparate magnitudes, which 
can be mediated only through a process of valua- 
tion conditioned by other circumstances besides the 
mechanical efficiency of the material means valued. 
Market values being a psychological outcome, it follows 
that pecuniary capital, an aggregate of market values, 
may vary in magnitude with a freedom which gives 


Industrial and Pecuniary Employments 311 


the whole an air of caprice-——such as psychological 
phenomena, particularly the psychological phenom- 
ena of crowds, frequently present, and such as be- 
comes strikingly noticeable in times of panic or of 
speculative inflation. On the other hand, industrial 
capital, being a matter of mechanical contrivances and 
adaptation, cannot similarly vary through a revision of 
valuations. If it is taken as an aggregate, it is a phys- 
ical magnitude, and as such it does not alter its com- 
plexion or its mechanical efficiency in response to the 
greater or less degree of appreciation with which it is 
viewed. Capital pecuniarily considered rests on a basis 
of subjective value; capital industrially considered rests 
on material circumstances reducible to objective terms 
of mechanical, chemical and physiological effect. 

The point has frequently been noted that it is im- 
possible to get at the aggregate social (industrial) capital 
by adding up the several items of individual (pecuniary) 
capital. A reason for this, apart from variations in the 
market values of given material means of production, is 
_that pecuniary capital comprises not only material things 
but also conventional facts, psychological pheno- 
mena not related in any rigid way to material means 
of production as e.g., good will, fashions, customs, 
prestige, effrontery, personal credit. Whatever owner- 
ship touches, and whatever affords ground for pecuni- 
ary discretion, may be turned to account for pecuniary 
gain and may therefore be comprised in the aggregate 
of pecuniary capital. Ownership, the basis of pecuniary 
capital, being itself a conventional fact, that is to say 
a matter of habits of thought, it is intelligible that phe- 
nomena of convention and opinion should figure in an 
inventory of pecuniary capital; whereas, industrial capi- 
tal being of a mechanical character, conventional cir- 


312 Industrial and Pecuniary Employments 


cumstances do not affect it—except as the future 
production of material means to replace the existing outfit 
may be guided by convention — and items having but a 
conventional existence are, therefore, not comprised in 
its aggregate. The disparity between pecuniary and in- 
dustrial capital, therefore, is something more than a 
matter of an arbitrarily chosen point of view, as some 
recent discussions of the capital concept would have us 
believe; just as the difference between the pecuniary 
and the industrial employments, which are occupied 
with the one or the other category of capital, means 
something more than the same thing under different 
aspects. 

But the distinction here attempted has a farther bear- 
ing, beyond the possible correction of a given point in 
the theory of distribution. Modern economic science id 
to an increasing extent concerning itself with the ques- 
tion of what men do and how and why they do it, as 
contrasted with the older question of how Nature, work- 
ing through human nature, maintains a favorable balance 
in the output of goods. Neither the practical questions 
of our generation, nor the pressing theoretical questions 
of the science, run on the adequacy or equity of the 
share that goes to any class in the normal case. The 
questions are rather such realistic ones as these: Why do 
we, now and again, have hard times and unemployment 
in the midst of excellent resources, high efficiency and 
plenty of unmet wants? Why is one-half our con- 
sumable product contrived for consumption that yields 
no material benefit? Why are large codrdinations of in 
dustry, which greatly reduce cost of production, a cause 
of perplexity and alarm? Why is the family disintegrat- 
ing among the industrial classes, at the same time that the 


Industrial and Pecumary Employments 313 


wherewithal to maintain it is easier to compass? Why 
are large and increasing portions of the community pen- 
niless in spite of a scale of remuneration which is very 
appreciably above the subsistence minimum? Why is 
there a widespread disaffection among the intelligent 
workmen who ought to know better? These and the like 
questions, being questions of fact, are not to be answered 
on the grounds of normal equivalence. Perhaps it might 
better be said that they have so often been answered on 
those grounds, without any approach to disposing of 
them, that the outlook for help in that direction has 
ceased to have a serious meaning. These are, to borrow 
Professor Clark’s phrase, questions to be answered on 
dynamic, not on static grounds. They are questions of 
conduct and sentiment, and so far as their solution is 
looked for at the hands of economists it must be looked 
for along the line of the bearing which economic life 
has upon the growth of sentiment and canons of con- 
duct. That is to say, they are questions of the bearing 
of economic life upon the cultural changes that are going 
forward. 

For the present it is the vogue to hold that economic 
life, broadly, conditions the rest of social organization 
or the constitution of society. This vogue of the propo- 
sition will serve as excuse from going into an examina- 
tion of the grounds on which it may be justified, as it 

is scarcely necessary to persuade any economist that it 
has substantial merits even if he may not accept it in 
an unqualified form. What the Marxists have named 
the “ Materialistic Conception of History” is assented 
to with less and less qualification by those who make 
the growth of culture their subject of inquiry. This 
materialistic conception says that institutions are shaped 


by economic conditions; but, as it left the hands of the 


314 Industrial and Pecuniary Employments 


Marxists, and as it still functions in the hands of many 
who knew not Marx, it has very little to say regarding 
the efficient force, the channels, or the methods by which 
the economic situation is conceived to have its effect upon 
institutions. What answer the early Marxists gave to 
this question, of how the economic situation shapes in- 
stitutions, was to the effect that the causal connection 
lies through a selfish, calculating class interest. But, 
while class interest may count for much in the outcome, 
this answer is plainly not a competent one, since, for one 
thing, institutions by no means change with the alacrity 
which the sole efficiency of a reasoned class interest would 
require. : 

Without discrediting the claim that class interest counts 
for something in the shaping of institutions, and to avoid 
getting entangled in preliminaries, it may be said’ that 
institutions are of the nature of prevalent habits of 
thought, and that therefore the force which shapes insti- 
tutions is the force or forces which shape the habits of 
thought prevalent in the community. But habits of 
thought are the outcome of habits of life. Whether it 
is intentionally directed to the education of the individual 
or not, the discipline of daily life acts to alter or reénforce 


fortify the received institutions under which men live. 
And the direction in which, on the whole, the alteration 
proceeds is conditioned by the trend of the discipline of 
daily life. The point here immediately at issue is the 
divergent trend of this discipline in those occupations 
which are prevailingly of an industrial character, as con- 
trasted with those which are prevailingly of a pecuniary 
character. So far as regards the different cultural out 
come to be looked for on the basis of the present economic 
situation as contrasted with the past, therefore, the ques- 


Industrial and Pecuniary Employments 315 


tion immediately in hand is as to the greater or less 
degree in which occupations are differentiated into in- 
dustrial and pecuniary in the present as compared with 
the past. 

The characteristic feature which is currently held to 
differentiate the existing economic situation from that 
out of which the present has developed, or out of which 
it is emerging, is the prevalence of the machine indus- 
try with the consequent larger and more highly special- 
ised organisation of the market and of the industrial 
force and plant. As has been pointed out above, and as 
is well enough known from the current discussions of 
the economists, industrial life is organised on a pecuni- 
ary basis and managed from the pecuniary side. This, 
of course, is true in a degree both of the present and of 
the nearer past, back at least as far as the Middle Ages. 
But the larger scope of organisations in modern indus- 
try means that the pecuniary management has been gradu- 
ally passing into the hands of a relatively decreasing 
class, whose contact with the industrial classes proper 
grows continually less immediate. The distinction be- 
tween employments above spoken of is in an increasing 
degree coming to coincide with a differentiation of occu- 
pations and of economic classes. Some degree of such 
specialisation and differentiation there has, of course, 
been, one might almost say, always. But in our time, 
in many branches of industry, the specialisation has been 
carried so far that large bodies of the working popula- 
tion have but an incidental contact with the business 
side of the enterprise, while a minority have little if any 
other concern with the enterprise than its pecuniary 
Management. This was not true, e. g., at the time when 
the undertaker was still salesman, purchasing agent, busi- 
hess manager, foreman of the shop, and master work- 


316 Industrial and Pecuniary Employments 


man. Still less was it true in the days of the self-suf- 
ficing manor or household, or in the days of the closed 
town industry. Neither is it true in our time of whai 
we call the backward or old-fashioned industries. These 
latter have not been and are not organised on a large 
scale, with a consistent division of labor between the: 
owners and business managers on the one side and the 
operative employees on the other. Our standing illustra- 
tions of this less highly organised class of industries are 
the surviving handicrafts and the common run of farm- 
ing as carried on by relatively small proprietors. In that 
earlier phase of economic life, out of which the modern 
situation has gradually grown, all the men engaged had 
to be constantly on their guard, in a pecuniary sense, and 
were constantly disciplined in the husbanding of their 
means and in the driving of bargains,—as is still true, 
e. g., of the American farmer. The like was formerly 
true also of the consumer, in his purchases, to a greater 
extent than at present. A good share of the daily at- 
tention of those who were engaged in the handicrafts was 
still perforce given to the pecuniary or business side of 
their trade. But for that great body of industry which 
is conventionally recognised as eminently modern, special- 
isation of function has gone so far as, in great measure, 
to exempt the operative employees from taking thought 
of pecuniary matters. 7 
Now, as to the bearing of all this upon cultural changes 
that are in progress or in the outlook. Leaving 
“backward,” relatively unspecialised, industries on one 
side, as being of an equivocal character for the point in 
hand and as not differing characteristically from the cor- 
responding industries in the past so far as regards their 
disciplinary value; modern occupations may, for the sake 
of the argument, be broadly distinguished, as economic 


rer rr ce 


Industrial and Pecuniary Employments 317 


employments have been distinguished above, into business 
and industrial. The modern industrial and the modern 
business occupations are fairly comparable as regards the 
degree of intelligence required in both, if it be borne in 
mind that the former occupations comprise the highly 
trained technological experts and engineers as well as the 
highly skilled mechanics. The two classes of occupa- 
tions differ in that the men in the pecuniary occupations 
work within the lines and under the guidance of the great 
institution of ownership, with its ramifications of cus- 
tom, perogative, and legal right; whereas those in the 
industrial occupations are, in their work, relatively free 
from the constraint of this conventional norm of truth 
and validity. It is, of course, not true that the work of 
the latter class lies outside the reach of the institution of 
ownership ; but it is true that, in the heat and strain of 
the work, when the agent’s powers and attention are 
fully taken up with the work which he has in hand, that 
of which he has perforce to take cognisance is not con- 
ventional law, but the conditions impersonally imposed 
by the nature of material things. This is the meaning 
of the current commonplace that the required close and 
continuous application of the operative in mechanical 
industry bars him out of all chance for an all-around 
development of the cultural graces and amenities. It is 
the periods of close attention and hard work that seem 
to count for most in the formation of habits of thought. 
An a priori argument as to what cultural effects should 
naturally follow from such a difference in discipline 
between occupations, past and present, would probably 
not be convincing, as a priori arguments from half-au- 
thenticated premises commonly are not. And the ex- 
periments along this line which later economic develop- 
ments have so far exhibited have been neither neat 


318 Industrial and Pecuniary Employments 


enough, comprehensive enough, nor long continued 
enough to give definite results. Still, there is something 
to be said under this latter head, even if this something 
may turn out to be somewhat familiar. 

It is, e.g., a commonplace of current vulgar discus-. 
sions of existing economic questions, that the classes 
engaged in the modern mechanical or factory industries 
are improvident and apparently incompetent to take care 
of the pecuniary details of their own life. In this indict- 
ment may well be included not only factory hands, but 
the general class of highly skilled mechanics, inventors, 
technological experts. The rule does not hold in any 
hard and fast way, but there seems to be a substantial 
ground of truth in the indictment in this general form. 
This will be evident on comparison of the present factory 
population with the class of handicraftsmen of the older 
culture whom they have displaced, as also on comparison 
with the farming population of the present time, espe 
cially the small proprietors of this and other countries. 
The inferiority which is currently conceded to the modern 
industrial classes in this respect is not due to scantier op- 
portunities for saving, whether they are compared with 
the earlier handicraftsmen or with the modern farmer or 
peasant. This phenomenon is commonly discussed in 
terms which impute to the improvident industrial classes 
something in the way of total depravity, and there is 
much preaching of thrift and steady habits. But the 
preaching of thrift and self-help, unremitting as it is, i 
not producing an appreciable effect. The trouble see 
to run deeper than exhortation can reach. It seems to be 
of the nature of habit rather than of reasoned convic 
tion. Other causes may be present and may be compe 
tent partially to explain the improvidence of these classes 
but the inquiry is at least a pertinent one; how far the 


Industrial and Pecuniary Employments 319 


absence of property and thrift among them may be 
traceable to the relative absence of pecuniary training in 
the discipline of their daily life. If, as the general lie 
of the subject would indicate, this peculiar pecuniary 
situation of the industrial classes is in any degree due 
to comprehensive disciplinary causes, there is material 
in it for an interesting economic inquiry. 

The surmise that the trouble with the industrial class 
is something of this character is strengthened by another 
feature of modern vulgar life, to which attention is di- 
rected as a further, and, for the present, a concluding 
illustration of the character of the questions that are 
touched by the distinction here spoken for. The most 
insidious and most alarming malady, as well as the most 
perplexing and unprecedented, that threatens the modern 
social and political structure is what is vaguely called 
socialism. The point of danger to the social structure, 
and at the same time the substantial core of the social- 
istic disaffection, is a growing disloyalty to the institution 
of property, aided and abetted as it is by a similarly 
growing lack of deference and affection for other con- 
ventional features of social structure. The classes af- 
fected by socialistic vagaries are not consistently averse 
to a competent organisation and control of society, par- 
ticularly not in the economic respect, but they are averse 
to organisation and control on conventional lines. The 
sense of solidarity does not seem to be either defective 
or in abeyance, but the ground of solidarity is new and 
unexpected. What their constructive ideals may be need 
not concern nor detain us; they are vague and incon- 
sistent and for the most part negative. Their disaffec- 
tion has been set down to discontent with their lot by 
comparison with others, and to a mistaken view of their 
Own interests; and much and futile effort has been spent 


320 Industrial and Pecuniary Employments 


in showing them the error of their ways of thinking. 
But what the experience of the past suggests that we 
should expect under the guidance of such motives and 
reasoning as these would be a demand for a redistribu- 
tion of property, a reconstitution of the conventions of 
ownership on such new lines as the apprehended inter- 
ests of these classes would seem to dictate. But such is 
not the trend of socialistic thinking, which contemplates 
rather the elimination of the institution of property. To 
the socialists property or ownership does not seem in 
evitable or inherent in the nature of things; to those wha 
criticise and admonish them it commonly does. | 

Compare them in this respect with other classes whe 
have been moved by hardship or discontent, whether 
well or ill advised, to put forth denunciations and de- 
mands for radical economic changes; as e. g., the Ameri- 
can farmers in their several movements, of grangerism, 
populism, and the like. These have been loud enough in 
their denunciations and complaints, and they have been 
accused of being socialistic in their demand for a virtual 
redistribution of property. They have not felt the justice 
of the accusation, however, and it is to be noted that 
their demands have consistently run on a rehabilitation 
of property on some new basis of distribution, and have 
been uniformly put forth with the avowed purpose of 
bettering the claimants in point of ownership. Owner: 
ship, property “honestly” acquired, has been sacred to 
the rural malcontents, here and elsewhere; what the} 
have aspired to do has been to remedy what they hav 
conceived to be certain abuses under the institution, 
without questioning the institution itself. . 

Not so with the socialists, either in this count 
elsewhere. Now, the spread of socialistic sentimen 
shows a curious tendency to affect those classes particu 


O1 


Industrial and Pecuniary Employments 321 


larly who are habitually employed in the specialised in- 
dustrial occupations, and are thereby in great part exempt 
from the intellectual discipline of pecuniary management. 
Among these men, who by the circumstances of their 
daily life are brought to do their serious and habitual 
thinking in other than pecuniary terms, it looks as if the 
ownership preconception were becoming obsolescent 
through disuse. It is the industrial population, in the 
modern sense, and particularly the more intelligent and 
skilled men employed in the mechanical industries, that 
are most seriously and widely affected. With exceptions 
both ways, but with a generality that is not to be denied, 
the socialistic disaffection spreads through the industrial 
towns, chiefly and most potently among the better classes 
of operatives in the mechanical employments; whereas 
the relatively indigent and unintelligent regions and 
classes, which the differentiation between pecuniary and 
industrial occupations has not reached, are relatively free 
from #. In like manner the upper and middle classes, 
whose employments are of a pecuniary character, if any, 
are also not seriously affected; and when avowed social- 
istic sentiment is met with among these upper and middle 
classes it commonly turns out to be merely a humanitarian 
aspiration for a more “equitable” redistribution of 
wealth —a readjustment of ownership under some new 
and improved method of control — not a contemplation 
of the traceless disappearance of ownership. 

Socialism, in the sense in which the word connotes a 
subversion of the economic foundations of modern 
culture, appears to be found only sporadically and un- 
certainly outside the limits, in time and space, of the 
discipline exercised by the modern mechanical, non- 
pecuniary occupations. This state of the case need of 
course not be due solely to the disciplinary effects of 


322 Industrial and Pecuniary Employments 


the industrial employments, nor even solely to effects 
traceable to those employments whether in the way of 
disciplinary results, selective development, or what not. 
Other factors, particularly factors of an ethnic character, 
seem to codperate to the result indicated; but, so far as 
evidence bearing on the point is yet in hand and has 
been analysed, it indicates that this differentiation of 
occupations is a necessary requisite to the growth of a 
consistent ‘body of socialistic sentiment; and the indica- 
tion is also that wherever this differentiation prevails 
in such a degree of accentuation and affects such con- 
siderable and compact bodies of people as to afford 
ground for a consistent growth of common sentiment, a 
result is some form of iconoclastic socialism. The dif- 
ferentiation may of course have a selective as well as a 
disciplinary effect upon the population affected, and an 
off-hand separation of these two modes of influence can 
of course not be made. In any case, the two modes of 
influence seem to converge to the outcome indicated; 
and, for the present purpose of illustration simply, the 
tracing out of the two strands of sequence in the case 
neither can nor need be undertaken. By force of this 
differentiation, in one way and another, the industrial 
classes are learning to think in terms of material cause 
and effect, to the neglect of prescription and conven- 
tional grounds of validity; just as, in a faintly incipient 
way, the economists are also learning to do in their dis- 
cussion of the life of these classes. The resulting decay 
of the popular sense of conventional validity of course 
extends to other matters than the pecuniary conventions 


alone, with the outcome that the socialistically affected — 


industrial classes are pretty uniformly affected with an 
effortless iconoclasm in other directions as well. For the 
discipline to which their work and habits of life subject 


Oe 


Industrial and Pecuniary Employments 323 


them gives not so much a training away from the pecu- 
niary conventions, specifically, as a positive and somewhat 
unmitigated training in methods of observation and infer- 
ence proceeding on grounds alien to all conventional 
validity. But the practical experiment going on in the 
specialisation of discipline, in the respect contemplated, 
appears still to be near itr beginning, and the growth of 
aberrant views and habits of thought due to the peculiar 
disciplinary trend of this late and unprecedented special- 
isation of occupations has not yet had time to work itself 
clear. 

The effects of the like one-sided discipline are simi- 
larly visible in the highly irregular, conventionally inde- 
fensible attitude of the industrial classes in the current 
labor and wage disputes, not of an avowedly socialistic 
aim. So also as regards the departure from the ancient 
norm in such non-economic, or secondarily economic mat- 
ters as the family relation and responsibility, where the 
disintegration of conventionalities in the industrial towns 
is said to threaten the foundations of domestic life and 
morality; and again as regards the growing inability of 
men trained to materialistic, industrial habits of thought 
to appreciate, or even to apprehend, the meaning of re- 
ligious appeals and consolations that proceed on the old- 
fashioned conventional or metaphysical grounds of 
validity. But these and other like directions in which 
the cultural effects of the modern specialisation of occu- 
pations, whether in industry or in business, may be trace- 
able can not be followed up here. 


ON THE NATURE OF CAPITAL? 


I. THE PropucTIvVITY oF CAPITAL Goops 


Ir has been usual in expositions of economic theory to 
speak of capital as an array of “productive goods.” 
What is immediately had in mind in this expression, as 
well as in the equivalent “capital goods,” is the indus- 
trial equipment, primarily the mechanical appliances em- 
ployed in the processes of industry. When the produc- 
tive efficiency of these and of other subsidiary classes of 
capital goods is subjected to further analysis, it is not 
unusual to trace it back to the productive labor of the 
workmen, the labor of the individual workman being the 
ultimate productive factor in the commonly accepted sys- 
tems of theory. The current theories of production, as 
also those of distribution, are drawn in individualistic 
terms, particularly when these theories are based on 
hedonistic premises, as they commonly are. 

Now, whatever may or may not be true for human 
conduct in some other bearing, in the economic respect 
man has never lived an isolated, self-sufficient life as an 
individual, either actually or potentially. — “Humanly 
speaking, such a thing is impossible. Neither an indi- 
vidual person nor a single household, nor a single line of 
descent, can maintain its life in isolation. Economically 
speaking, this is the characteristic trait of humanity that 
separates mankind from the other animals. The life- 
history of the race has been a life-history of human com- 


1 Reprinted by permission from The Quarterly Journal of 
Economics, Vol. XXII, Aug., 1908. 
324 


On the Nature of Capital 325 


munities, of more or less considerable size, with more or 
less of group solidarity, and with more or less of cultural 
continuity over successive generations. The phenomena 
of human life occur only in this form. 

This continuity, congruity, or coherence of the group, 
is of an immaterial character. It is a matter of knowl- 
edge, usage, habits of life and habits of thought, not a 
matter of mechanical continuity or contact, or even of 
consanguinity. Wherever a human community is met 
with, as, e.g., among any of the peoples of the lower cul- 
tures, it is found in possession of something in the way 
of a body of technological knowledge,— knowledge serv- 
iceable and requisite to the quest of a livelihood, compris- 
ing at least such elementary acquirements as language, the 
use of fire, of a cutting edge, of a pointed stick, of some 
tool for piercing, of some form of cord, thong, or fiber, 
together with some skill in the making of knots and lash- 
ings. Coordinate with this knowledge of ways and 
means, there is also uniformly present some matter-of- 
fact knowledge of the physical behavior of the materials 
with which men have to deal in the quest of a livelihood, 
beyond what any one individual has learned or can learn 
by his own experience alone. This information and pro- 
“ficiency in the ways and means of life vests in the group 
_at large; and, apart from accretions borrowed from other 
"groups, it is the product of the given group, though not 


tangible assets? of the eames and, in the sti days 
at least, this is far and away the most important and 


2“ Assets” is, of course, not to be taken literally in this connec- 
tion. The term properly covers a pecuniary concept, not an in- 
dustrial (technological) one, and it connotes ownership as well as 
value; and it will be used in this literal sense when, in a later 
article, ownership and investment come into the discussion. In 


326 On the Nature of Capital 


consequential category of the community’s assets or equip- 
ment. Without access to such a common stock of imma- 
terial equipment no individual and no fraction of the 
community can make a living, much less make an ad- 
vance. Stch a stock of knowledge and practice is per- 
haps held loosely and informally ; but it is held as a com- 
mon stock, pervasively, by the group as a body, in its 
corporate capacity, as one might say ; and it is transmitted 
and augmented in and by the group, however loose and 
haphazard the transmission may be conceived to be, not 
by individuals and in single lines of inheritance. 

The requisite knowledge and proficiency of ways and 
means is a product, perhaps a by-product, of the life of 
the community at large; and it can also be maintained 
and retained only by the community at large. Whatever 
may be true for the unsearchable prehistoric phases of 
the life-history of the race, it appears to be true for the 
most primitive human groups and phases of which there | 
is available information that the mass of technological — 
knowledge possessed by any community, and necessary to 
its maintenance and to the maintenance of each of its 
members or subgroups, is too large a burden for any one 
~-individual or any single line of descent to carry. This 
holds true, of course, all the more rigorously and con- 
sistently, the more advanced the “ state of the industrial 
arts” may be. But it seems to hold true with a generality 
that is fairly startling, that whenever a given cultural 
community is broken up or suffers a serious diminution 
of numbers, its technological heritage deteriorates and 
dwindles, even though it may have been apparently mea- 
ger enough before. On the other hand, it seems to hold 


a. 


the present connection it is used figuratively, for want of a better — 
term, to convey the connotation of value and serviceability with- 
out thereby implying ownership. 


On the Nature of Capital a27 


true with a similar uniformity that, when an individual 
member or a fraction of a community on what we calla 
lower stage of economic development is drawn away and 
trained and instructed in the ways of a larger and more 
efficient technology, and is then thrown back into his 
home community, such an individual or fraction proves 
unable to make head against the technological bent of the 
community at large or even to create a serious diversion. 
Slight, perhaps transient, and gradually effective techno- 
logical consequences may result from such an experiment ; 
but they become effective by diffusion and assimilation 
through the body of the community, not in any marked 
degree in the way of an exceptional efficiency on the part 
of the individual or fraction which has been subjected to 
exceptional training. And inheritance in technological 
matters runs not in the channels of consanguinity, but in 
those of tradition and habituation, which are necessarily 
as wide as the scheme of life of the community. Even in 
a relatively small and primitive community the mass of 
detail comprised in its knowledge and practice of ways 
and means is large— too large for any one individual or 
household to become competently expert in it all; and its 
ramifications are extensive and diverse, at the same time 
that all these ramifications bear, directly or indirectly, on 
the life and work of each member of the community. 


Neither the standard and routine of living nor the daily 


work of any individual in the community would remain 
the same after the introduction of an appreciable change, 
for good or ill, in any branch of the community’s equip- 
ment of technological expedients. If the community 
grows larger, to the dimensions of a modern civilised peo- 
ple, and this immaterial equipment grows proportionately 
great and various, then it will become increasingly diffi- 
cult to trace the connection between any given change in 


328 On the Nature of Capital 


technological detail and the fortunes of any given obscure 
member of the community. But it is at least safe to say 
that an increase in the volume and complexity of the 
body of technological knowledge and practice does not 
progressively emancipate the life and work of the indi- 
vidual from its dominion. 

The complement of technological knowledge so held, 
used, and transmitted in the life of the community is, of 
course, made up out of the experience of individuals. 
Experience, experimentation, habit, knowledge, initiative, 
are phenomena of individual life, and it is necessarily 
from this source that the community’s common stock is 
all derived. The possibility of its growth lies in the feas- | 
ibility of accumulating knowledge gained by individual — 
experience and initiative, and therefore it lies in the feasi- 
bility of one individual’s learning from the experience of 
another. But the initiative and technological enterprise 
of individuals, such, e.g., as shows itself in inventions and 
discoveries of more and better ways and means, proceeds 
on and enlarges the accumulated wisdom of the past. 
Individual initiative has no chance except on the ground 
afforded by the common stock, and the achievements of 
such initiative are of no effect except as accretions to the 
common stock. And the invention or discovery so 
achieved always embodies so much of what is already 
given that the creative contribution of the inventor ) 
discoverer is trivial by comparison. 

In any known phase of culture this common stock of 
intangible, technological equipment is relatively large a 
complex,— i.e., relatively to the capacity of any individ- 
ual member to create or to use it; and the history of i 
growth and use is the history of the development of mate- 
rial civilisation. It is a knowledge of ways and means, 
and is embodied in the material contrivances and proc- 


On the Nature of Capital 329 


esses by means of which the members of the community 
make their living. Only by such means does technologi- 
cal efficiency go into effect. These “material contriv- 
ances” (“capital goods,” material equipment) are such 
things as tools, vessels, vehicles, raw materials, buildings, 
ditches, and the like, including the land in use; but they 
include also, and through the greater part of the early 
development chiefly, the useful minerals, plants, and ani- 
mals. To say that these minerals, plants, and animals are 
useful — in other words, that they are economic goods — 
means that they have been brought within the sweep of 
the community’s knowledge of ways and means. 

In the relatively early stages of primitive culture the 
useful plants and minerals are, no doubt, made use of in 
a wild state, as, e.g., fish and timber have continued to be 
used. Yet in so far as they are useful they are unmis- 
takably to be counted in among the material equipment 


(“tangible assets”’) of the community. The case is well 


illustrated by the relation of the Plains Indians to the 
buffalo, and by the northwest coast Indians to the salmon, 
on the one hand, and by the use of a wild flora by such 
communities as the Coahuilla Indians,? the Australian 
blacks, or the Andamanese, on the other hand. 

But with the current of time, experience, and initiative, 
domesticated (that is to say improved) plants and animals 
come to take the first place. We have then such “ tech- 
nological expedients ” in the first rank as the many species 
and varieties of domestic animals, and more particularly 
still the various grains, fruits, root-crops, and the like, 
virtually all of which were created by man for human 
use; or perhaps a more scrupulously veracious account 
would say that they were in the main created by the 
women, through long ages of workmanlike selection and 


3 Barrows. 


330 On the Nature of Capital 


cultivation. These things, of course, are useful because 
men have learned their use, and their use, so far as it 
has been learned, has been learned by protracted and 
voluminous experience and experimentation, proceeding 
at each step on the accumulated achievements of the past. 
Other things, which may in time come to exceed these in 
usefulness are still useless, economically non-existent, or 
the early levels of culture, because of what men in that 
time have not yet learned. 


While this immaterial equipment of industry, the in 
tangible assets of the community, have apparently alway: 
been relatively very considerable and are always mainly 
in the keeping of the community at large, the materia 
equipment, the tangible assets, on the other hand, have 
in the early stages (say the earlier 90 per cent.) of th 
life-history of human culture, been relatively slight, anc 
have apparently been held somewhat loosely by indi 
uals or household groups. This material equipment 1 
relatively very slight in the earlier phases of technologice 
development, and the tenure by which it is held is appar 
ently vague and uncertain. At a relatively primiti 
phase of the development, and under ordinary conditior 
of climate and surroundings, the possession of the cot 
crete articles (“ capital goods”) needed to turn the com 
monplace knowledge of ways and means to account is 
matter of slight consequence,— contrary to the view cot 
monly spoken for by the economists of the classical I 
Given the commonplace technological knowledge an 
commonplace training,— and these are given by co 
notoriety and the habituation of daily life,—the ac 
tion, construction, or usufruct of the slender ma 
equipment needed arranges itself almost as a matter ¢ 


Se cin 


On the Nature of Capital 331 


course, more particularly where this material equipment 
_ does not include a stock of domestic animals or a planta- 
tion of domesticated trees and vegetables. Under given 
circumstances a relatively primitive technological scheme 
may involve some large items of material equipment, as 
the buffalo pens (piskun) of the Blackfoot Indians or the 
salmon weirs of the river Indians of the northwest coast. 
Such items of material equipment are then likely to be 
held and worked collectively, either by the community at 
large or by subgroups of a considerable size. Under or- 
dinary, more generally prevalent conditions, it appears 
that even after a relatively great advance has been made in 
the cultivation of crops the requisite industrial equipment 
is not a matter of serious concern, particularly so aside 
_ from the tilled ground and the cultivated trees, as is indi- 
cated by the singularly loose and inconsequential notions 
of ownership prevalent among peoples occupying such a 
stage of culture. A primitive stage of communism is 
‘not known. 

But as the common stock of technological knowledge 
increases in volume, range, and efficiency, the material 
equipment whereby this knowledge of ways and means is 
put into effect grows greater, more considerable relatively 
to the capacity of the individual. And so soon, or in so 
far, as the technological development falls into such shape 
as to require a relatively large unit of material equipment 

_ for the effective pursuit of industry, or such as otherwise 
‘to make the possession of the requisite material equip- 
‘ment a matter of consequence, so as seriously to handicap 
the individuals who are without these material means, and 
to place the current possessors of such equipment at a 
marked advantage, then the strong arm intervenes, prop- 
erty rights apparently begin to fall into definite shape, the 


332 On the Nature of Capital 


principles of ownership gather force and consistency, and 
men begin to accumulate capital goods and take meas 
to make them secure. | 
An appreciable advance in the industrial arts is com 
monly followed or accompanied by an increase of popula- 
tion. The difficulty of procuring a livelihood may be no 
greater after such an increase; it may even be less; bu 
there results a relative curtailment of the available area. 
and raw materials, and commonly also an increased acces- 
sibility of the several portions of the community. A 
wide-reaching control becomes easier. At the same time 
a larger unit of material equipment is needed for the 
effective pursuit of industry. As this situation develops. 
it becomes worth while — this is to say, it becomes feas- 
eo — for Be individual with the strong arm to engross, 
or “ corner,” the usufruct of the commonplace knowledge 
of ways and means by taking over such of the requisite 
material as may be relatively scarce and relatively indi . 
pensable for procuring a livelihood under the current 
state of the industrial arts. Circumstances of space 
and numbers prevent escape from the new technologica 
situation. The commonplace knowledge of ways and 
means cannot be turned to account, under the new condi- 
tions, without a material equipment adapted to the then 
current state of the industrial arts; and such a suitable 
material equipment is no longer a slight matter, to be 
compassed by workmanlike initiative and application. 
Beati possidentes. 


The emphasis of the technological situation, as one 


4Motives of exploit and emulation, no doubt, play a serious 
part in bringing on the practice of ownership and in establishing 
the principles on which it rests; but this play of motives and the 
concomitant growth of institutions cannot be taken up here. 
The Theory of the Leisure Class, chaps. i, ii, iii. 


j On the Nature of Capital 333 


_ might say, may fall now on one line of material items, 
_ mow on another, according as the exigencies of climate, 
topography, flora and fauna, density of population, and 
the like, may decide. So also, under the rule of the same 
_ exigencies, the early growth of property rights and of the 
principles (habits of thought) of ownership may settle on 
one or another line of material items, according as one or 
another affords the strategic advantage for engrossing the 
current technological efficiency of the community. 

Should the technological situation, the state of the in- 
dustrial arts, be such as to throw the strategic emphasis on 
manual labor, on workmanlike skill and application, and 
if at the same time the growth of population has made 
land relatively scarce, or hostile contact with other com- 
_ munities has made it impracticable for members of the 
“community to range freely over outlying tracts, then it 
would be expected that the growth of ownership should 

take the direction primarily of slavery, or of some equiva- 
lent form of servitude, so effecting a naive and direct 
monopolistic control of the current knowledge of ways 
and means. Whereas if the development has taken such 
a turn, and the community is so placed as to make the 
quest of a livelihood a matter of the natural increase of 
flocks and herds, then it should reasonably be expected 
that these items of equipment will be the chief and pri- 
mary subject of property rights. In point of fact, it ap- 
pears that a pastoral culture commonly involves also some 
degree of servitude, along with the ownership of flocks 
and herds. 

Under different circumstances the mechanical appli- 
ances of industry, or the tillable land, might come into the 
Position of strategic advantage, and might come in for the 


j 5 Cf. H. Nieboer, Slavery as an Industrial System, chap. iv, 
‘sect. 12. 


334 On the Nature of Capital 


foremost place in men’s consideration as objects of owner- 
ship. The evidence afforded by the known (relatively) 
primitive cultures and communities seems to indicate that 
slaves and cattle have in this way come into the primacy 
as objects of ownership at an earlier period in the growth 
of material civilisation than land or the mechanical appli 4 
ances. And it seems similarly evident — more so, indeed 
— that land has on the whole preceded the mechanical 
equipment as the stronghold of ownership and the means 
of engrossing the community’s industrial efficiency. 

It is not until a late period in the life-history of material 
civilisation that ownership of the industrial equipment, in 
the narrower sense in which that phrase is commonly em- 
ployed, comes to be the dominant and typical method of 
engrossing the immaterial equipment. Indeed, it is 
consummation which has been reached only a very few 
times even partially, and only once with such a degree of 
finality as to leave the fact indisputable. If it may be 
said, loosely, that mastery through the ownership of 
slaves, cattle, or land comes on in force only after the 
economic development has run through some nine-tenths 
of its course hitherto, then it may be said likewise that 
some ninety-nine one-hundredths of this course of devel- 
opment had been completed before the ownership of the 
mechanical equipment came into undisputed primacy a 
the basis of pecuniary dominion. So late an innovation 
indeed, is this modern institution of “ capitalism,”’— the 


of life, that we have some difficulty in seeing it in persp ; 
tive at all, and we find ourselves hesitating between den 


the other hand. 


On the Nature of Capital 335 


In so speaking of the ownership of industrial equip- 
ment as being an institution for cornering the commu- 
nity’s intangible assets, there is conveyed an unavoidably 
implied, though unintended, note of condemnation. Such 
an implication of merit or demerit is an untoward cir- 
cumstance in any theoretical inquiry. Any sentimental 
bias, whether of approval or disapproval, aroused by such 
an implied censure, must unavoidably hamper the dispas- 
sionate pursuit of the argument. To mitigate the effect 
of this jarring note as far as may be, therefore, it will be 
expedient to turn back for a moment to other, more primi- 
tive and remoter forms of the institution,— as slavery and 
landed wealth,— and so reach the modern facts of indus- 
trial capital by a roundabout and gradual approach. 

These ancient institutions of ownership, slavery and 
landed wealth, are matters of history. Considered as 
dominant factors in the community’s scheme of life, their 
record is completed; and it needs no argument to enforce 
the proposition that it is a record of economic dominion 
by the owners of the slaves or the land, as the case may 
be. The effect of slavery in its best day, and of landed 
wealth in medizval and early modern times, was to make 
the community’s industrial efficiency serve the needs of 
the slave-owners in the one case and of the land-owners 
in the other. The effect of these institutions in this re- 
spect is not questioned now, except in such sporadic and 
apologetical fashion as need not detain the argument. 

But the fact that such was the direct and immediate 
effect of these institutions of ownership in their time by 
no means involves the instant condemnation of the institu- 
tions in question. It is quite possible to argue that slav- 
ery and landed wealth, each in its due time and due cul- 
tural setting, have served the amelioration of the lot of 
man and the advance of human culture. What these 


336 On the Nature of Capital 


arguments may be that aim to show the merits of slavery i 
and landed wealth as a means of cultural advance does — 
not concern the present inquiry, neither do the merits of — 
the case in which the arguments are offered. The matter — 
is referred to here to call to mind that any similar theo- | 
retical outcome of an analysis of the productivity of © 
“ capital goods ” need not be admitted to touch the merits — 
of the case in controversy between the socialistic critics of — 
capitalism and the spokesmen of law and order. 
The nature of landed wealth, in point of economic ~ 
theory, especially as regards its productivity, has been 
sifted with the most jealous precautions and the most — 
tenacious logic during the past century ; and any economic 
student can easily review the course of the argument 
whereby that line of economic theory has been run to — 
earth. It is only necessary here to shift the point of — 
view slightly to bring the whole argument concerning the — 
rent of land to bear on the present question. Rent is of 
the nature of a differential gain, resting on a differential 
advantage in point of productivity of the industry em- 
ployed upon or about it. This differential advantage — 
attaching to a given parcel of land may be a differential — 
as against another parcel or as against industry applied — 
apart from land. The differential advantage attaching — 
to agricultural land — e.g., as against industry at large— 
rests on certain broad peculiarities of the technological — 
situation. Among them are such peculiarities as these: 
the human species, or the fraction of it concerned in the ~ 
case, is numerous, relatively to the extent of its habitat; 
the methods of getting a living, as hitherto elaborated, the 
ways and means of life, make use of certain crop-plants ~ 
and certain domestic animals. Apart from such condi- 
tions, taken for granted in arguments concerning agricul- 
tural rent, there could manifestly be no differential ad- 


On the Nature of Capital 337 


vantage attaching to land, and no production of rent. 
With increased command of methods of transportation, 
the agricultural lands of England, e.g., and of Europe at 
large, declined in value, not because these lands became 
less fertile, but because an equivalent result could more 
advantageously be got by a new method. So, again, the 
flint- and amber-bearing regions that are now Danish 
and Swedish territory about the waters at the entrance 
to the Baltic were in the neolithic culture of northern 
Europe the most favored and valuable lands within that 
cultural region. But, with the coming of the metals and 
the relative decline of the amber trade, they began to fall 
behind in the scale of productivity and preference. So 
also in later time, with the rise of “industry” and the 
growth of the technology of communication, urban prop- 
erty has gained, as contrasted with rural property, and 
land placed in an advantageous position relatively to ship- 
ping and railroads has acquired a value and a “ produc- 
tiveness ” which could not be claimed for it apart from 
these modern technological expedients. 

The argument of the single-tax advocates and other 
economists as to the “ unearned increment ”’ is sufficiently 
familiar, but its ulterior implications have not commonly 
been recognised. The unearned increment, it is held, is 
produced by the growth of the community in numbers 
and in the industrial arts. The contention seems to be 
sound, and is commonly accepted; but it has commonly 
been overlooked that the argument involves the ulterior 
conclusion that all land values and land productivity, in- 
cluding the “original and indestructible powers of the 
soil,” are a function of the “state of the industrial art.” 
Tt is only within the given technological situation, the 
current scheme of ways and means, that any parcel of 
land has such productive powers as it has. It is, in other 


338 On the Nature of Capital 


words, useful only because, and in so far, and in such 
manner, as men have learned to make use of it. This is 
what brings it into the category of “land,” economically 
speaking. And the preferential position of the landlord 
as a claimant of the “net product” consists in his legal 
right to decide whether, how far, and on what terms men 
shall put this technological scheme into effect in those 
features of it which involve the use of his parcel of land. 


All this argument concerning the unearned increment 
may be carried over, with scarcely a change of phrase, to 
the case of “capital goods.” The Danish flint supply 
was of first-rate economic consequence, for a thousand 
years or so, during the stone age; and the polished-flint | 
utensils of that time were then “ capital goods ” of ines- 
timable importance to civilisation, and were possessed of | 
a “productivity ” so serious that the life of mankind in . 
that world may be said to have been balanced on the fine- 
ground edge of those magnificent polished-flint axes. All 
that lasted through its technological era. The flint supply — 
and the mechanical expedients and “capital goods,” 
whereby it was turned to account, were valuable and 
productive then, but neither before nor after that time. 
Under a changed technological situation the capital goods 
of that time have become museum exhibits, and their 
place in human economy has been taken by technological 
expedients which embody another “ state of the industrial 
arts,” the outcome of later and different phases of human 
experience. Like the polished-flint ax, the metal utensils — 
which gradually displaced it and its like in the economy 
of the Occidental culture were the product of long experi- — 
ence and the gradual learning of ways and means. The © 
steel ax, as well as the flint ax, embodies the same an- 
cient technological expedient of a cutting edge, as well a 


ce 


ss 
| On the Nature of Capital 339 
Y 


the use of a helve and the efficiency due to the weight of 
the tool. And in the case of the one or the other, when 

seen in historical perspective and looked at from the point 
of view of the community at large, the knowledge of ways 
and means embodied in the utensils was the serious and 
consequential matter. The construction or acquisition of 
_ the concrete “capital goods” was simply an easy conse- 
_ quence. It “cost nothing but labor,’ as Thomas Mun 
- would say. 

Yet it might be argued that each concrete article of 
“capital goods” was the product of some one man’s 
labor, and, as such, its productivity, when put to use, was 
_ but the indirect, ulterior, deferred productiveness of the 
_ maker’s labor. But the maker’s productivity in the case 
: was but a function of the immaterial technological equip- 
_ ment at his command, and that in its turn was the slow 
5 spiritual distillate of the community’s time-long experi- 

ence and initiative. To the individual producer or owner, 
} to whom the community’s accumulated stock of immate- 
_ tial equipment was open by common notoriety, the cost of 
_ the concrete material goods would be the effort involved 
in making or getting them and in making good his claim 
to them. To his neighbor who had made or acquired no 
_ such parcel of “ productive goods,” but to whom the re- 
_ sources of the community, material and immaterial, were 
_ Open on the same easy terms, the matter would look very 
much the same. He would have no grievance, nor would 
he have occasion to seek one. Yet, as a resource in the 
maintenance of the community’s life and a factor in the 
advance of material civilisation, the whole matter would 
ve a different meaning. 

So long, or rather in so far, as the “capital goods” 
Tequired to meet the technological demands of the time 
were slight enough to be compassed by the common man 


—— “ 


‘ 


340 On the Nature of Capital 


with reasonable diligence and proficiency, so long the 

draft upon the common stock of immaterial assets by any — 
one would be no hindrance to any other, and no differen- 

tial advantage or disadvantage would emerge. The eco-— 
nomic situation would answer passably to the classical 

theory of a free competitive system,— “ the obvious and — 
simple system of natural liberty,” which rests on the pre- | 
sumption of equal opportunity. In a roughly approxi- : 
mate way, such a situation supervened in the industrial 
life of western Europe on the transition from medizval 
to modern times, when handicraft and “ industrial ” enter- 
prise superseded landed wealth as the chief economic 
factor. Within the “ industrial system,” as distinct from 
the privileged non-industrial classes, a man with a modi- 
cum of diligence, initiative, and thrift might make his 
way in a tolerable fashion without special advantages in 
the way of prescriptive right or accumulated means. The 
principle of equal opportunity was, no doubt, met only in 
a very rough and dubious fashion; but so favorable be- 
came the conditions in this respect that men came to per- 
suade themselves in the course of the eighteenth century 
that a substantially equitable allotment of opportunities: 
would result from the abrogation of all prerogatives other 
than the ownership of goods. But so precarious and 
transient was this approximation to a technologicall 
feasible system of equal opportunity that, while the liber 
movement which converged upon this great economic fr 
form was still gathering head, the technological situatio 
was already outgrowing the possibility of such a scheme 
of reform. After the Industrial Revolution came on, i 
was no longer true, even in the roughly approximate wa 
in which it might have been true some time earlier, t 
equality before the law, barring property rights, woul 
mean equal opportunity. In the leading, aggressive i 


On the Nature of Capital 341 


dustries which were beginning to set the pace for all that 
economic system that centered about the market, the unit 
of industrial equipment, as required by the new techno- 
logical era, was larger than one man could compass by his 
own efforts with the free use of the commonplace knowl- 
edge of ways and means. And the growth of business 
enterprise progressively made the position of the small, 
old-fashioned producer more precarious. But the specu- 
lative theoreticians of that time still saw the phenomena 
of current economic life in the light of the handicraft tra- 
ditions and of the preconceptions of natural rights asso- 
ciated with that system, and still looked to the ideal of 
“natural liberty’ as the goal of economic development 
and the end of economic reform. They were ruled by the 
principles (habits of thought) which had arisen out of an 
earlier situation, so effectually as not to see that the rule 
of equal opportunity which they aimed to establish was 


already technologically obsolete.® 


During the hundred years and more of this ascendancy 
of the natural-rights theories in economic science, the 
growth of technological knowledge has unremittingly 
gone forward, and concomitantly the large-scale industry 
has grown great and progressively dominated the field. 
This large-scale industrial régime is what the socialists, 
and some others, call “capitalism.” ‘“ Capitalism,” as so 
used, is not a neat and rigid technical term, but it is 
definite enough to be useful for many purposes. On its 


_ technological side the characteristic trait of this capitalism 


is that the current pursuit of industry requires a larger 
unit of material equipment than one individual can com- 


6 For a more extended discussion of this point see the Quar- 
terly Journal of Economics, July, 1899, “The Preconceptions of 
Economic Science”; also The Theory of Business Enterprise, 
‘chap. iv, especially pp. 70-82. 


342 On the Nature of Capital 


pass by his own labor, and larger than one person can 
make use of alone. 

So soon as the capitalist régime, in this sense, comes in, — 
it ceases to be true that the owner of the industrial equip- 
ment (or the controller of it) in any given case is or may © 
be the producer of it, in any naive sense of “ produc- | 
tion.” He is under the necessity of acquiring its owner- 
ship or control by some other expedient than that of in-— 
dustrially productive work. The pursuit of industry re- 
quires an accumulation of wealth, and, barring force, 
fraud, and inheritance, the method of acquiring such an 
accumulation of wealth is necessarily some form of bar- 
gaining; that is to say, some form of business enterprise. 
Wealth is accumulated, within the industrial field, from ~ 
the gains of business; that is to say, from the gains of 
advantageous bargaining.’ Taking the situation by and 
large, looking to the body of business enterprise as a 
whole, the advantageous bargaining from which gains 
accrue and from which, therefore, accumulations of capi- 
tal are derived, is necessarily, in the last analysis, a bar- 
gaining between those who own (or control) industrial 
wealth and those whose work turns this wealth to account 
in productive industry. This bargaining for hire — com- 
monly a wage agreement — is conducted under the rule of 
free contract, and is concluded according to the play of 
demand and supply, as has been well set forth by many 
writers. 

On this technological view of capital, as here spoken 


7 Marx holds that the “primitive accumulation” from whi 
capitalism takes its rise is a matter of force and fraud (Capital, 
Book I, chap. xxiv.). Sombart holds the source to have been 
landed wealth (Moderne Kapitalismus, Book II, Part I, 
especially chap. xii). Ehrenberg and other critics of Sombart 
incline to the view that the most important source was usury and 
the petty trade (Zeitalter der Fugger, chaps. i, ii). 


On the Nature of Capital 343 


for, the relations between the two parties to the bargain, 
the capitalist-employer and the working class, stand as 
follows. More or less rigorously, the technological situ- 
ation enforces a certain scale and method in the various 
lines of industry.£. The industry can, in effect, be carried 
on only by recourse to the technologically requisite scale 
and method, and this requires a material equipment of a 
certain (large) magnitude; while material equipment of 
this required magnitude is held exclusively by the capi- 
talist-employer, and is de facto beyond the reach of the 
common man. 

A corresponding body of immaterial equipment — 
knowledge and practice of ways and means — is likewise 
requisite, under the rule of the same technological exigen- 

cies. This immaterial equipment is in part drawn on in 
the making of the material equipment held by the capi- 
_ talist-employers, in part in the use to be made of this 
material equipment in the further processes of industry. 
_ This body of immaterial equipment so drawn on in any 
_ line of industry is, relatively, still larger, being, on any 
exhaustive analysis, virtually the whole body of industrial 
experience accumulated by the community up to date. A 
free draft on this common stock of technological wisdom 
must be had both in the construction and in the subse- 
quent use of the material equipment; although no one 
person can master, or himself employ, more than an 
_inconsiderable fraction of the immaterial equipment so 


i 


’ 


8 The phrase “more or less” covers a certain margin of toler- 
ance in respect of scale and method, which may be very appre- 
% ciably wider in some lines of industry than in others, and which 
_ cannot be more adequately defined or described here within such 
' space as could reasonably be allowed. The requirement of scale 
and method is enforced by competition. The force and reach of 
_ this competitive adjustment can also not be dealt with here, but 
the familiar current acceptance of the fact will dispense with 


' details. 


Se ees ee 


344 On the Nature of Capital 


drawn on for the installation or operation of any given 
block of the material equipment. 

The owner of the material equipment, the capitalist- 
employer, is, in the typical case, not possessed of any 
appreciable fraction of the immaterial equipment neces- 
sarily drawn on in the construction and subsequent use of 
the material equipment owned (controlled) by him. His 
knowledge and training, so far as it enters into the ques- 
tion, is a knowledge of business, not of industry. The 
slight technological proficiency which he has or needs for 
his business ends is of a general character, wholly super- 
ficial and impracticable in point of workmanlike effi- 
ciency ; nor is it turned to account in actual workmanship. 
He therefore “ needs in his business ” the service of per- 
sons who have a competent working mastery of this im- 
material technological equipment, and it is with such per- 
sons that his bargains for hire are made. By and large, 
the measure of their serviceability for his ends is the 
measure of their technological competency. No work- 
man not possessed of some fractional mastery of the tech- 
nological requirements is employed,— imbeciles are use- 
less in proportion to their imbecility; and even unskilled 
and “ unintelligent ” workmen, so called, are of relatively 
little use, although they may be possessed of a proficiency 
in the commonplace industrial details such as would bul 
large in absolute magnitude. The “ common laborer ” is, 
in fact, a highly trained and widely proficient workm 
when contrasted with the conceivable human blank sup- 
posed to have drawn on the community for nothing but 
his physique. 

In the hands of these workmen — the industrial com 
munity, the bearers of the immaterial, technological equip 
ment — the capital goods owned by the capitalist become 


: 


9 Cf. Theory of Business Enterprise, chap. iti. 


On the Nature of Capital 345 


a “ means of production.” Without them, or in the hands 
of men who do not know their use, the goods in question 
would be simply raw materials, somewhat deranged and 
impaired through having been given the form which now 
makes them “capital goods.” The more proficient the 
workmen in their mastery of the technological expedients 
involved, and the greater the facility with which they are 
able to put these expedients into effect, the more produc- 
tive will be the processes in which the workmen turn the 
employer’s capital goods to account. So, also, the more 
competent the work of “ superintendence,” the foreman- 
like oversight and correlation of the work in respect of 
kind, speed, volume, the more will it count in the aggre- 
gate of productive efficiency. But this work of correla- 
tion is a function of the foreman’s mastery of the techno- 
logical situation at large and his facility in proportioning 
one process of industry to the requirements and effects of 
another. Without this due and sagacious correlation of 
the processes of industry, and their current adaptation to 
the demands of the industrial situation at large, the mate- 
rial equipment engaged would have but slight efficiency 
and would count for but little in the way of capital goods. 
The efficiency of the control exercised by the master- 
workman, engineer, superintendent, or whatever term 
may be used to designate the technological expert who 
controls and correlates the productive processes,— this 
workmanlike efficiency determines how far the given ma- 
terial equipment is effectually to be rated as “ capital 
goods.” 

Through all this functioning of the workman and the 
foreman the capitalist’s business ends are ever in the back- 
ground, and the degree of success that attends his busi- 
mess endeavors depends, other things equal, on the effi- 
ciency with which these technologists carry on the proc- 


346 On the Nature of Capital 


esses of industry in which he has invested. His working 
arrangements with these workmen, the bearers of the 
immaterial equipment engaged, enables the capitalist to 
turn the processes for which his capital goods are adapted 
to account for his own profit, but at the cost of such a. 
deduction from the aggregate product of these processes 
as the workmen may be able to demand in return for their 
work. The amount of this deduction is determined by 
the competitive bidding of other capitalists who may have 
use for the same lines of technological efficiency, in the 
manner set forth by writers on wages. 
With the conceivable consolidation of all material 
assets under one business management, so as to eliminate 
competitive bidding between employers, it is plain that 
the resulting business concern would command the undi- 
vided forces of the technological situation, with such de- 
duction as is involved in the livelihood of the working 
population. This livelihood would in such a case be 
duced to the most economical footing, as seen from the 
standpoint of the employer. And the employer (capital 
ist) would be the de facto owner of the community's 
aggregate knowledge of ways and means, except so far as 
this body of immaterial equipment serves also the house: 
keeping routine of the working population. How nearly 
the current economic situation may approach to this fin 
ished state is a matter of opinion. There is also place for 
a broad question whether the conditions are more or les 
favorable to the working population under the existing 
business régime, involving competitive bidding between 
the several business concerns, than they would be in 
a comprehensive business consolidation had eliminatec 
compétition and placed the ownership of the material 
assets on a footing of unqualified monopoly. Nothin 


On the Nature of Capital 347 


but vague surmises can apparently be offered in answer 
to these questions. 

But as bearing on the question of monopoly and the 
use of the community’s immaterial equipment it is to be 
kept in mind that the technological situation as it stands 
to-day does not admit of a complete monopolisation of 
the community’s technological expedients, even if a com- 
plete monopolisation of the existing aggregate of material 
property were effected. There is still current a large ~ 
‘body of industrial processes to which the large-scale 
methods do not apply and which do not presume such a 
large unit of material equipment or involve such rigorous 
correlation with the large-scale industry as to take them 
out of the range of discretionary use by persons not pos- 
sessed of appreciable material wealth. Typical of such 
lines of work, hitherto not amenable to monopolisation, 
are the details of housekeeping routine alluded to above. 
It is, in fact, still possible for an appreciable fraction of 

the population to “ pick up a living,” more or less precari- 


_ ous, without recourse to the large-scale processes that are 


controlled by the owners of the material assets. This 
somewhat precarious margin of free recourse to the com- 
monplace knowledge of ways and means appears to be 
‘what stands in the way of a neater adjustment of wages 
to the “minimum of subsistence ”’ and the virtual owner- 
ship of the immaterial equipment by the owners of the 


_ material equipment. 


It follows from what has been said that all tangible *° 
assets owe their productivity and their value to the imma- 
terial industrial expedients which they embody or which 

10“ Tangible assets” is here taken to signify serviceable capital 


_ goods considered as valuable possessions yielding income to their 
owner. 


348 On the Nature of Capital 


their ownership enables their owner to engross. These 
immaterial industrial expedients are necessarily a product 
of the community, the immaterial residue of the commu- 
nity’s experience, past and present; which has no exist- 
ence apart from the community’s life, and can be trans-: 
mitted only in the keeping of the community at large. 
It may be objected by those who make much of the pro- 
ductivity of capital that tangible capital goods on hand 
are themselves of value and have a specific productive 
efficiency, if not apart from the industrial processes in. 
which they serve, then at least as a prerequisite to these 
processes, and therefore a material condition-precedent 
standing in a causal relation to the industrial product. 
But these material goods are themselves a product of the 
past exercise of technological knowledge, and so back to 
the beginning. What there is involved in the material 
equipment, which is not of this immaterial, spiritual na- 
ture, and so what is not an immaterial residue of the 
community’s experience, is the raw material out of which 
the industrial appliances are constructed, with the stress 
falling wholly on the “ raw.” 

The point is illustrated by what happens to a mechani- 
cal contrivance which goes out of date because of a tech- 
nological advance and is displaced by a new contrivance 
embodying a new process. Such a contrivance “ goes ta 
the junk-heap,” as the phrase has it. The specific tech- 
nological expedient which it embodies ceases to be effec= 
tive in industry, in competition with “ improved methods.” 
It ceases to be an immaterial asset. When it is in this 
way eliminated, the material repository of it ceases to 
have value as capital. It ceases to be a material asset. 
“The original and indestructible powers” of the mate- 
rial constituents of capital goods, to adapt Ricardo’s 
phrase, do not make these constituents capital goods ; nor, 


On the Nature of Capital 349 


indeed, do these original and indestructible powers of 
themselves bring the objects in question into the cate- 
_ gory of economic goods at all. The raw materials — 
land, minerals, and the like — may, of course, be valuable 
property, and may be counted among the assets of a busi- 
ness. But the value which they so have is a function of 
the anticipated use to which they may be put, and that is 
a function of the technological situation under which it is 
anticipated that they will be useful. 


All this may seem to undervalue or perhaps to overlook 
the physical facts of industry and the physical nature of 
commodities. There is, of course, no call to understate 
the importance of material goods or of manual labor. 
The goods about which this inquiry turns are the products 
of trained labor working on the available materials; but 
the labor has to be trained, in the large sense, in order to 
be labor, and the materials have to be available in order 
to be materials of industry. And both the trained effi- 
ciency of the labor and the availability of the material 
objects engaged are a function of the “ state of the indus- 
eatial arts.” 

Yet the state of the industrial arts is dependent on the 
traits of human nature, physical, intellectual, and spirit- 
ual, and on the character of the material environment. 
Tt is out of these elements that the human technology is 
made up; and this technology is efficient only as it meets 
with the suitable material conditions and is worked out, 
practically, in the material forces required. The brute 
_ forces of the human animal are an indispensable factor in 
‘industry, as are likewise the physical characteristics of 
the material objects with which industry deals. And it 
‘seems bootless to ask how much of the products of indus- 


350 On the Nature of Capital 


try or of its productivity is to be imputed to these brute 
forces, human and non-human, as contrasted with the spe- 
cifically human factors that make technological efficiency 
Nor is it necessary to go into questions of that import 
here, since the inquiry here turns on the productive rela- 
tion of capital to industry; that is to say, the relation of 
the material equipment and its ownership to men’s deal- 
ings with the physical environment in which the race is 
placed. The question of capital goods (including that 
of their ownership and therefore including the question of 
investment) is a question of how mankind as a species of 
intelligent animals deals with the brute forces at its dis- 
posal. It is a question of how the human agent deals 
with his means of life, not of how the forces of the 
environment deal with man. Questions of the latter class 
belong under the head of Ecology, a branch of the bio- 
logical sciences dealing with the adaptive variability of 
plants and animals. Economic inquiry would belong 
under that category if the human response to the forces 
of the environment were instinctive and variational only, 
including nothing in the way of a technology. But in 
that case there would be no question of capital goods, or 
of capital, or of labor. Such questions do not arise in 
relation to the non-human animals. i. 

In an inquiry into the productivity of labor some per- 
plexity might be met with as to the share or the place of 
the brute forces of the human organism in the theory of 
production; but in relation to capital that question does 
not arise, except so far as these forces are involved in the 
production of the capital goods. As a parenthesis, more 
or less germane to the present inquiry into capital, it may 
be remarked that an analysis of the productive powers of 
labor would apparently take account of the brute energies 


ON THE NATURE OF CAPITAL* 


II. INVESTMENT, INTANGIBLE ASSETS, AND THE 
PECUNIARY MAGNATE 


Wuat has been said in the earlier section of this paper * 
applies to “ capital goods,” so called, and it is intended to 
apply to these in their character of “ productive goods ” 
rather than in their character of “ capital’; that is to say, 
what is had in mind is the industrial, or technological, — 
efficiency and subservience of the material means of pro- 
duction, rather than the pecuniary use and effect of in- 
vested wealth. The inquiry has dealt with the industrial 
equipment as “plant” rather than as “assets.” In the 
course of this inquiry it has appeared that out of the 
profitable engrossing of the community’s industrial effi- 
ciency through control of the material equipment there 
arises the practice of investment, which has further con- 
sequences that merit more detailed attention. 

Investment is a pecuniary transaction, and its aim is 
pecuniary gain,— gain in terms of value and ownership. 
Invested wealth is capital, a pecuniary magnitude, meas- 
ured in terms of value and determined in respect of its” 
magnitude by a valuation which proceeds on an appraise- 
ment of the gain expected from the ownership of this” 
invested wealth. In modern business practice, capital is 
distinguished into two coordinate categories of assets, 


‘ 


1Reprinted by permission from The Quarterly Journal of 
Economics, Vol. XXIII, Nov., 1908. 
2 See this Journal for August, 1908. 


352 


On the Nature of Capital 353 


tangible and intangible. “ Tangible assets ” is here taken 
to designate pecuniarily serviceable capital goods, consid- 
ered as a valuable possession yielding an income to their 
owner. Such goods, material items of wealth, are 
“assets” to the amount of their capitalisable value, which 
may be more or less closely related to their industrial 
serviceability as productive goods. “Intangible assets” 
are immaterial items of wealth, immaterial facts owned, 
valued, and capitalised on an appraisement of the gain to 
be derived from their possession. These are also assets 
to the amount of their capitalisable value, which has 
commonly little, if any, relation to the industrial service- 
ability of these items of wealth considered as factors of 
production. 


Before going into the matter of intangible assets, it is 
necessary to speak further of the consequences which 
investment — and hence capitalisation — has for the use 
and serviceability of (material) capital goods. It has 
commonly been assumed by economists, without much 
scrutiny, that the gains which accrue from invested wealth 
are derived from and (roughly) measured by the pro- 
ductivity of the industrial process in which the items of 
wealth so invested are employed, productivity being 
counted in some terms of material serviceability to the 
community, conduciveness to the livelihood, comfort, or 
consumptive needs of the community. In the course of 
the present inquiry it has appeared that the gainfulness 
of such invested wealth (tangible assets) is due to a more 
or less extensive engrossing of the community’s industrial 


efficiency. The aggregate gains of the aggregate material 


capital accrue from the community’s industrial activity, 


_and bear some relation to the productive capacity of the 
_ industrial traffic so engrossed. But it will be noted that 


354 On the Nature of Capital 


there is no warrant in the analysis of these phenomena 
as here set forth for alleging that the gains of investment 
bear a relation of equality or proportion to the material — 
serviceability of the capital goods, as rated in terms of — 
effectual usefulness to the community. Given capital — 
goods, tangible assets, may owe their pecuniary service- 
ability to their owner, and so their value, to other things 
than their serviceability to the community; although the 
gains of investment in the aggregate are drawn from the 
aggregate material productivity of the community’s in- 
dustry. 

The ownership of the material equipment gives the 
owner not only the right of use over the community’s 
immaterial equipment, but also the right of abuse and of 
neglect or inhibition. This power of inhibition may be 
made to afford an income, as well as the power to serve; 
and whatever will yield an income may be capitalised 
and become an item of wealth to its possessor. Under © 
modern conditions of investment it happens not infre- 
quently that it becomes pecuniarily expedient for the 
owner of the material equipment to curtail or retard the 
processes of industry,—“ restraint of trade.” The motive 
in all such cases of retardation is the pecuniary expedi- 
ency of the measure for the owner (controller) of capital, 
— expediency in terms of income from investment, not 
expediency in terms of serviceability to the community at 
large or to any fraction of the community except the 
owner (manager). Except for the exigencies of invest- 
ment, 7.¢e., exigencies of pecuniary gain to the investor, 
phenomena of this character would have no place in the 
industrial system. They invariably come of the endeay- 
ors of business men to secure a pecuniary gain or to avoid 
a pecuniary loss. More frequently, perhaps, manceuvers 
of inhibition — advised idleness of plant—§in industry 


On the Nature of Capital 355 


aim to effect a saving or avoid a waste than to procure 
an increase of gain; but the saving to be effected and the 


_ waste to be avoided are always pecuniary saving to the 


owner and pecuniary waste in the matter of ownership, 
not a saving of goods to the community or a prevention 
of wasteful consumption or wasteful expenditure of effort 


_ and resources on the part of the community. Pecuniary 


— that is to say, differential — advantage to the capitalist- 
manager has, under the régime of investment, taken prece- 
dence of economic advantage to the community ; or rather, 
the differential advantage of ownership is alone regarded 
in the conduct of industry under this system. 

Business practices which inhibit industrial efficiency 
and curtail the industrial output are too well known to 
need particular enumeration. Nor is it necessary to cite 
evidence to show that such inhibition and curtailment are 
resorted to from motives of pecuniary expediency. But 
an illustrative example or two will make the theoretical 
point clearer, and perhaps more plainly bring out the 
wholly pecuniary grounds of such business procedure. 
The most comprehensive principle involved in this class 
of business management is that of raising prices, and so 
increasing the net gains of business, by limiting the sup- 
ply, or “ charging what the traffic will bear.” Of a sim- 
ilar effect, for the point here in question, are the ob- 
structive tactics designed to hinder the full efficiency of 
a business rival. These phenomena lie along the line of 


_ division between tangible and intangible assets. Success- 


ful strategy of this kind may, by force of custom, legisla- 
tion, or the “ freezing-out”’ of rival concerns, pass into 


_ settled conditions of differential advantage for the given 


_ business concern, which so may be capitalised as an item 


% of intangible assets and take their place in the business 


_ community as articles of invested wealth. 


356 On the Nature of Capital 


But, aside from such capitalisation of inefficiency, it 
is at least an equally consequential fact that the processes 
of productive industry are governed in detail by the exi- 
gencies of investment, and therefore by the quest of gain 
as counted in terms of price, which leads to the depend- 
ence of production on the course of prices. So that, 
under the régime of capital, the community is unable to 
turn its knowledge of ways and means to account for a 
livelihood except at such seasons and in so far as the 
course of prices affords a differential advantage to the 
owners of the material equipment.. The question of ad- — 
vantageous — which commonly means rising — prices for 
the owners (managers) of the capital goods is made to — 
decide the question of livelihood for the rest of the com- 
munity. The recurrence of hard times, unemployment, 
and the rest of that familiar range of phenomena, goes to 
show how effectual is the inhibition of industry exercised 
by the ownership of capital under the price system.® 

So also as regards the discretionary abuse of the com- 
munity’s industrial efficiency vested in the owner of the 
material equipment. Disserviceability may be capitalised 
as readily as serviceability, and the ownership of the 
capital goods affords a discretionary power of misdirect- 
ing the industrial processes and perverting* industrial 
efficiency, as well as of inhibiting or curtailing industrial 
processes and their output, while the outcome may still 
be profitable to the owner of the capital goods. There is 
a large volume of capital goods whose value lies in their 
turning the technological inheritance to the injury of man- 


3 For the connection between prices and prosperity, hard times, 
unemployment, etc., see The Theory of Business Enterprise, 
chap. vii (pp. 185-252, especially 196-212). 

4 By “perversion” is here meant such disposition of the indus: 
trial forces as entails a net waste or detriment to the community’s 
livelihood. 


On the Nature of Capital 357 


kind. Such are, e.g., naval and military establishments, 
together with the docks, arsenals, schools, and manu- 
factories of arms, ammunition, and naval and military 
stores, that supplement and supply such establishments. 
These armaments and the like are, of course, public and 
quasi-public enterprises, under the current régime, with 
somewhat disputable relations to the system of current 
business enterprise. But it is no far-fetched interpreta- 
tion to say that they are, in great part, a material equip- 
ment for the maintenance of law and order, and so enable 
the owners of capital goods with immunity to inhibit or 
pervert the industrial processes when the exigencies of 
business profits make it expedient; that they are, further, 
a means — more or less ineffectual, it is true —for ex- 
tending and protecting trade, and so serve the differential 
advantage of business men at the cost of the community ; 
and that they are also in large part a material equipment 
set apart for the diversion of a livelihood from the com- 
munity at large to the military, naval, diplomatic, and 
other official classes. These establishments may in any 
case be taken as illustrating how items of material equip- 
ment may be devoted to and may be valued for the use of 
the technological expedients for the damage and discom- 
fort of mankind, without sensible offset or abatement. 
Typical of a class of investments which derive profits 
from capital goods devoted to uses that are altogether 
dubious, with a large presumption of net detriment, are 
such establishments as race-tracks, saloons, gambling- 
houses, and houses of prostitution.» Some spokesmen of 


5 Should the connection at this point with the main argument 
of the paper as set forth in the earlier section seem doubtful or 
obscure, it may be called to mind that these dubious enterprises in 
dissipation are cases of investment for a profit, and that the 
“capital goods” engaged are invested wealth yielding an income, 
‘but that they yield an income only on the fulfillment of two 


358 On the Nature of Capital 


the “ non-Christian tribes ” might wish to include churches 
under the same category, but the consensus of opinion in 
modern communities inclines to look on churches as serv- 
iceable, on the whole; and it may be as well not to at- 
tempt to assign them a specific place in the scheme of 
serviceable and disserviceable use of invested wealth. 
There is, further, a large field of business, employing 
much capital goods and many technological processes, 
whose profits come from products in which serviceability 
and disserviceability are mingled with waste in the most 
varying proportions. Such are the production of goods 
of fashion, disingenuous proprietary articles, sophisticated 
household supplies, newspapers and advertising enter- 
prise. In the degree in which business of this class draws 
its profits from wasteful practices, spurious goods, illu-— 
sions and delusions, skilled mendacity, and the like, the 
capital goods engaged must be said to owe their capital- 
isable value to a perverse use of the technological expe- 
dients employed. . 
These wasteful or disserviceable uses of capital goods 
have been cited, not as implying that the technological 
proficiency embodied in these goods or brought into ef- 


conditions: (a) the possession and employment of these capital 
goods enables their holder to turn to account the common stock 
of technological proficiency, in those bearings in which it may be 
of use in his enterprise; and (b) the limited amount of wealth 
available for the purpose enables their holder to “engross” the 
usufruct of such a fraction of the common stock of technological 
proficiency, in the degree determined by this limitation of the 
amount available. In so far, these enterprises are like any 
other industrial enterprise; but beyond this they have the 
peculiarity that they do not, or need not, even ostensibly, turn the 
current knowledge and use of ways and means to “ productive” 
account for the community at large, but simply take their stand 
on the (institutionally sacred) “accomplished fact” of invested 
wealth. They have less of the fog of apology about them than 
the common run of business enterprise. 


On the Nature of Capital 359 


fect in their use, intrinsically has a disserviceable bearing, 
nor that investment in these things, and business enter- 
prise in the management of them, need aim at disserv- 
iceability, but only to bring out certain minor points 
of theory, obvious but commonly overlooked: (a) tech- 
nological proficiency is not of itself and intrinsically serv- 
iceable or disserviceable to mankind,— it is only a means 
of efficiency for good or ill; (b) the enterprising use of 
capital goods by their businesslike owner aims not at 
serviceability to the community, but only at serviceability 
to the owner; (c) under the price system — under the rule 
of pecuniary standards and management — circumstances 
make it advisable for the business man at times to mis- 
manage the processes of industry, in the sense that it is 
expedient for his pecuniary gain to inhibit, curtail, or mis- 
direct industry, and so turn the community’s technological 
proficiency to the community’s detriment. These some- 
what commonplace points of theory are of no great weight 
in themselves, but they are of consequence for any theory 
of business or of life under the rules of the price system, 
and they have an immediate bearing here on the question 
of intangible assets. 


At the risk of some tedium it is necessary to the theory 
of intangible assets to pursue this analysis and piecing 
together of commonplaces somewhat farther. As has 
already been remarked, “assets” is a pecuniary concept, 

_ not a technological one; a concept of business, not of in- 
dustry. Assets are capital, and tangible assets are items 
of material equipment and the like, considered as avail- 
able for capitalisation. The tangibility of tangible assets 
is a matter of the materiality of the items of wealth of 
which they are made up, while they are assets to the 

amount of their value. Capital goods, which typically 


360 On the Nature of Capital 


make up the category of tangible assets, are capital goods - 
by virtue of their technological serviceability, but they 
are capital in the measure, not of their technological sery- 
iceability, but in the measure of the income which they — 
may yield to their owner. The like is, of course, true of 
intangible assets, which are likewise capital, or assets, in 
the measure of their income-yielding capacity. Their 
intangibility is a matter of the immateriality of the items 
of wealth — objects of ownership— of which they are 
made up, but their character and magnitude as assets i 
a matter of the gainfulness to their owner of the processes 
which their ownership enables him to engross. The facts 
so engrossed, in the case of intangible assets, are not of a 
technological or industrial character; and herein lies t 
substantial disparity between tangible and intangible as- 
sets. 

Mankind has other dealings with the material means of 
life, besides those covered by the community’s technolog- 
ical proficiency. These other dealings have to do with 
the use, distribution, and consumption of the goods pro- 
cured by the employment of the community’s technological 
proficiency, and are carried out under working arrange- 
ments of an institutional character— use and wont, law 
and custom. The principles and practice of the distribu 1- 
tion of wealth vary with the changes in technology and 
with the other cultural changes that are going forward; 
but it is probably safe to assume that the principles of 
apportionment,— that is to say, the consensus of habit al 
opinion as to what is right and good in the distribution of 
the product,— these principles and the concomitant meth- 
ods of carrying them out in practice have always beet 
such as to give one person or group or class something 
of a settled preference above another. Something of 
this kind, something in the way of a conventionally ar- 


—————————E=r SS 


On the Nature of Capital 361 


ranged differential advantage in the apportionment of the 
common livelihood, is to be found in all cultures and com- 
munities that have been observed at all carefully; and 
it is perhaps needless to remark that in the higher cul- 
tures such economic preferences, privileges, prerogatives, 
differential advantages and disadvantages, are numerous 
and varied, and that they make up an intricate fabric of 
economic institutions. Indeed, peculiarities of class dif- 
ference in some such respect are among the most striking 
and decisive features that distinguish one cultural era 
from another. In all phases of material civilisation these 
preferential advantages are sought and valued. Classes 
or groups which are in a position to make good a claim 
to such differential advantages commonly come, in due 
course, to put forward such claims; as, e.g., the priest- 
hood, the princely and ruling class, the men as contrasted 
with the women, the adults as against minors, the able- 
bodied as against the infirm. Principles (habits of 
thought) countenancing some form of class or personal 
preference in the distribution of income are to be found 
incorporated in the moral code of all known civilisations 
and embodied in some form of institution. Such items 
of immaterial wealth are of a differential character, in 
that the advantage of those who secure the preference is 
the disadvantage of those who do not; and it may be men- 
tioned in passing, that such a differential advantage inur- 
“ing to any one class or person commonly carries a more 
than equal disadvantage to some other class or person or 
_to the community at large.® 


SThis statement may not seem clear without indicating in a 
_M™ore concrete manner some terms in which to measure the rela- 
tive differential advantage and disadvantage which so emerge in 
such a case of prerogative or privilege. Where, as in the earlier, 
“non-pecuniary phases of culture, no price test is applicable, the 


‘statement in the text may be taken to mean that the differential 


362 On the Nature of Capital 


When property rights fall into definite shape and the 
price system comes in, and more particularly when the 
practice of investment arises and business enterprise 
comes into vogue, such differential advantages take on 
something of the character of intangible assets. Theg 
come to have a pecuniary value and rating, whether they 
are transferable or not; and if they are transferable, if 
they can be sold and delivered, they become assets in a 
fairly clear and full sense of that term. Such immaterial 
wealth, preferential benefits of the nature of intangible 
assets, may be a matter of usage simply, as the vogue 
of a given public house, or of a given tradesman, or of a 
given brand of consumable goods; or may be a matter 
of arrogation, as the King’s Customs in early times, or 
the once notorious Sound Dues, or the closing of public 
highways by large land-owners; or of contractual conces- 
sion, as the freedom of a city or a guild, or a franchise in 
the Hanseatic League or in the Associated Press; or of 
government concession, whether on the basis of a barga 
or otherwise, as the many trade monopolies of early 
modern times, or a corporation charter, or a railway fran- 
chise, or letters of marque, or letters patent; or of sta 
utory creation, as trade protection by import, export, 
excise duties or navigation laws; or of conventionalised 
superstitious punctilio, as the creation of a demand fot 
wax by the devoutly obligatory consumption of conse- 
crated tapers, or the similar devout consumption of and 
demand for fish during Lent. 

Under the régime of investment and business enter- 
prise these and the like differential benefits may turn te 
the business advantage of a’ given class, group, or con 


disadvantage at the cost of which the differential benefit in ques- 
tion is gained is greater than the beneficiary would be willing to 
undergo in order to procure this benefit. 


On the Nature of Capital 363 


cern, and in such an event the resulting differential busi- 
ness advantage in the pursuit of gain becomes an asset, 
capitalised on the basis of its income-yielding capacity, 
and possibly vendible under the cover of a corporation 
security (as, e.g., common stock), or even under the usual 
form of private sale (as, e.g., the appraised good-will of 
a business concern). 

But the régime of business enterprise has not only taken 
over various forms of institutional privileges and preroga- 
tives out of the past: it also gives rise to new kinds of 
differential advantage and capitalises them into intan- 
gible assets. These are all (or virtually all) of one kind, 
in that their common aim and common basis of value 
and capitalisation is a preferentially advantageous sale. 
Naturally so, since the end of all business endeavor, in 
the last analysis, is an advantageous sale. The common- 
est and typical kind of such intangible assets is “ good- 
will,” so called,— a term which has come to cover a great 
variety of differential business advantages, but which in 
the original business usage of it meant the customary re- 
sort of a clientéle to the concern so possessed of the good- 
will. It seems originally to have implied a kindly senti- 
ment of trust and esteem on the part of a customer, but 
as the term is now used it has lost this sentimental con- 
tent. In the broad and loose sense in which it is now 
currently employed it is extended to cover such special 
advantages as inure to a monopoly or a combination of 
_ business concerns through its power to limit or engross 
_ the supply of a given line of goods or services. So long 
-as such a special advantage is not specifically protected 
by special legislation or by a due legal instrument,— as 
‘in the case of a franchise or a patent right,— it is likely 
to be spoken of loosely as “ good-will.” 

_ The results of the analysis may be summed up to show 


- 


364 On the Nature of Capital 


the degree of coincidence and the distinctions between 


the two categories of assets: (a) the value (that is to say, 


the amount) of given assets, whether tangible or intan- 
gible, is the capitalised (or capitalisable) value of the 
given articles of wealth, rated on the basis of their income- 
yielding capacity to their owner; (b) in the case of tan- 


ability at large, since they serve a materially productive 
work, and there is therefore a presumption, more or les 


in the case of intangible assets there is no presumption the 
the objects of wealth involved have any serviceability 
large, since they serve no materially productive wo 
but only a differential advantage to the owner in the d 
tribution of the industrial product;*7 (d) given tangi 


7A doubt has been offered as to the applicability of this chi r 
acterization to such intangible assets as a patent Tight and otl 
items of the same class. The doubt seems to arise from a 
apprehension of the analysis and of its intention. It shoul 
remarked that there is no intention to condemn or disappré 
any of the items here spoken of as intangible assets. 
patent right may be justifiable or it may not: there is no call 
discuss that question here. Other intangible assets are in th 
same case in this respect. 

Further, as to the character of a patent right collared as 
asset. The invention or innovation covered by the patent rig! 
a contribution to the common stock of technological profic 
It may be (immediately) serviceable to the community at large 
it may not; —é.g., a cash register, a bank-check punch, a s' 
car fare register; a burglar-proof safe, and the like are o 
immediate service to the community at large, but serve on 
pecuniary use to their users. But, whether the innovation is u: 
ful or not, the patent right, as an asset, has no (immediate) 
fulness at large, since its essence is the restriction of the usufr 
of the innovation to the patentee. Immediately and directly 
patent right must be considered a detriment to the communi 
large, since its purport is to prevent the community from 


On the Nature of Capital 365 


assets may be disserviceable to the community,— a given 
material equipment may owe its value as capital to a dis- 
serviceable use, though in the aggregate or on an average 
the body of tangible assets are (presumptively) service- 
able; (e) given intangible assets may be indifferent in re- 
spect of serviceability at large, though in the aggregate, 
Or on an average, intangible assets are (presumably) dis- 
serviceable to the community. 

On this showing it would appear that the substantial 
difference between tangible and intangible assets lies in 
the different character of the immaterial facts which are 
turned to pecuniary account in the one case and in the 
other. The former, in effect, capitalise such fraction of 
the technological proficiency of the community as the 
ownership of the capital goods involved enables the owner 
to engross. The latter capitalise such habits of life, of a 
non-technological character,— settled by usage, conven- 
tion, arrogation, legislative action, or what not,—as will 
effect a differential advantage to the concern to which 
the assets in question appertain. The former owe their 
existence and magnitude to the usufruct of technological 
expedients involved in the industrial process proper; 
while the latter are in like manner due to the usufruct 
of what may be called the interstitial correlations and ad- 
justments both within the industrial system and between 
industry proper and the market, in so far as these rela- 
tions are of a pecuniary rather than a technological char- 
acter. Much the same distinction may be put in other 
words, so as to bring the expression nearer the current 
popular apprehension of the matter, by saying that tan- 
gible assets, commonly so called, capitalise the processes 
of production, while intangible assets, so called, capitalise 


use of the patented innovation, whatever may be its ulterior bene- 
ficial effects or its ethical justification. 


366 On the Nature of Capital 


certain expedients and processes of acquisition, not pro- 


Formulated in either way, the distinction seems not to 
be an altogether hard-and-fast one, as will immediately 
appear if it is called to mind that intangible assets may b 2 
converted into tangible assets, and conversely, as the 
exigencies of business may decide. Yet, while the two 
categories of assets stand in such close relation to one 
another as this state of things presumes, it is still evident 
from the same state of things that they are not to be con- 
founded with one another. i 

Taking “ good-will” as typical of the category of “ in- 
tangible assets,” as being the most widely prevalent and 
at the same time the farthest removed in its characteris-_ 
tics from the range of “ tangible assets,” some slight fur- 
ther discussion of it may serve to bring out the difference 


recognition as a factor affecting assets, it was apparen y 
looked on habitually as an adventitious differential ad- 


to which it appertained; an immaterial by-product of 
concern’s conduct of business,— commonly presumed to 
be an adventitious blessing incident to an upright and 
humane course of business life. Poor Richard would 
express this sense of the matter in the saying that “ hon- 
esty is the best policy.” But presently, no doubt, some 


man in that behalf. Goods would be given a more é : 
gant finish for the sake of a readier sale, beyond what 


On the Nature of Capital 367 


would conduce to their brute serviceability simply; 
smooth-spoken and obsequious salesmen and solicitors, 
gifted with a tactful effrontery, have come to be pre- 
ferred to others, who, without these merits, may be pos- 
sessed of all the diligence, dexterity, and muscular force 
required in their trade; something is expended on con- 
vincing, not to say vain-glorious, show-windows that shall 
promise something more than one would like to commit 
one’s self to in words; itinerant agents, and the like, are 
employed at some expense to secure a clientéle; much 
thought and substance is spent on advertising of many 
kinds. 

This last-named item may be taken as typical of the 
present stage of growth in the production or generation 
of good-will, and therefore in the creation of intangible 
assets. Advertising has come to be an important branch 
of business enterprise by itself, and it employs a large 
and varied array of material appliances and processes 
(tangible assets). Investment is made in certain material 
items (productive goods), such as printed matter, bill- 
boards, and the like, with a view to creating a certain 
body of good-will. The precise magnitude of the product 
may not be foreseen, but, if sagaciously made, such in- 
vestment rarely fails of the effect aimed at— unless a 
business rival with even greater sagacity should out- 
manceuver and offset these endeavors with a superior 
array of appliances (productive goods) and workmen for 
_ the generation of good-will. The product aimed at, com- 
monly with effect, is good-will,— an intangible asset,— 
which may be considered to have been generated by con- 
verting certain tangible assets into this intangible; or it 
may be considered as an industrial product, the output of 
certain industrial processes in which the given items of 
_ material equipment are employed and give effect to the 


368 On the Nature of Capital 


requisite technological proficiency. Whichever view be — 
taken of the causal relation between the material equip-— 
ment and processes employed, on the one hand, and the - 
output of good-will, on the other hand, the result is sub-_ 
stantially the same for the purpose in hand. g 

The ulterior end of the advertising is, it may be said, — 
the sale of an increased quantity of the advertised articles, — 
at an increased net gain; which would mean an increased ~ 
value of the material items offered for sale; which, in 
turn, is the same as saying an increase of tangible assets. 
It may be assumed without debate that the end of busi-— 
ness endeavor is a gain in final terms of tangible values. 
But this ulterior end is, in the case of advertising enter-— 
prise, to be gained only by the intermediate step of a 
production of an immaterial item of good-will, an in- 
tangible asset. 4 

So the case in illustration shows not only the conver- 
sion of tangible assets (material capital goods, such as” 
printed matter) into intangible wealth, or, if that formula 
be preferred, the production of immaterial wealth by the 
productive use of material wealth, but also, conversely, 
in the second step of the process, it shows the conversion 
of intangible assets into tangible wealth (enhanced value 
of vendible goods), or, if the expression seems preferable, 
the production of tangible assets by the use of intangible 
wealth. 

This creation of tangible wealth out of intangible assets 
is seen perhaps at its neatest in the enhancement of land 
values by the endeavors of interested parties. Real estate 
is, of course, a tangible asset of the most authentic tangi 


current value of the real estate, and therefore its current 


On the Nature of Capital 369 


actual magnitude as a tangible asset. The value of the 
real estate might also be computed by capitalising its 
rental value; but, where the current market value does 
not coincide with the capitalised rental value, the former 
must, according to business conceptions, be accepted as 
the actual value. In many parts of this country, perhaps 
in most, but particularly in the Western States and in the 
neighborhood of flourishing towns, these two methods of 
rating the pecuniary magnitude of real estate will habitu- 
ally not coincide. Due allowance, often very consider- 
able, being made, the capitalised rental value of the land 
may be taken as measuring its current serviceability as 
an item of material equipment; while the amount by 
which the market value of the land exceeds its capitalised 
rental value may be taken as the product, the tangible 
residue, of an intangible asset of the nature of good-will, 
turned to account, or “ productively employed,” in behalf 
of this parcel of land.® 

Some of the lands of California may be taken as a very 
good, though perhaps not an extreme, example of such a 
creation of real estate by spiritual instrumentalities. It 
is probably well within the mark to say that some of these 
lands owe not more than one-half their current market 
value to their current serviceability as an instrument of 
production or use. The excess may be attributable to 
illusions touching the chances of future sale, to anticipa- 
tion of a prospective enhanced usefulness, and the like; 


8 Neither as a physical magnitude (“land”) nor as a pecuniary 
Magnitude (“real estate”) is the capitalised land in question an 
item of “good-will”; but its value as real estate —i.¢., its mag- 
Mitude as an asset—is in part a product of the “good-will” 

illusions and the like) worked up in its behalf and turned to 
account, by the land agent. The real estate is a tangible asset, an 
item of material wealth, while the “ good-will” to which in part 
it Owes its magnitude as an item of wealth is an intangible 
asset, an item of immaterial wealth. 


370 On the Nature of Capital 


but all these are immaterial factors, of the nature of good ; 
will. Like other assets, these lands are capitalised on the 


income is anticipated from profitable sales to persons who, 
it is hoped, will be persuaded to take a very sanguine view 


vertising matter and the efforts of the land agents directed 
to what is called “ developing the country.” 

To any one preoccupied with the conceit that “ capital” 
means “capital goods” such a conversion of intangible 
into tangible goods, or such a generation of intangible as- 
sets by the productive use of tangible assets, might be 
something of a puzzle. If “assets” were a physical con- 
cept, covering a range of physical things, instead of a 
pecuniary concept, such conversion of tangible into in- 
tangible assets, and conversely, would be a case of tran- 
substantiation. But there is nothing miraculous in the 
matter. ‘‘ Assets” are a pecuniary magnitude, and be- 
long among the facts of investment. Except in relatior 
to investment the items of wealth involved are not assets 


Ea: 


In other words, assets are a matter of capitalisation 
which is a special case of valuation; and the question of 
tangibility or intangibility as regards a given parcel of 
assets is a question of what article or class of articles 
the valuation shall attach to or be imputed to. If, eg. 
the fact to which value is imputed in the valuation is the 
habitual demand for a given article of merchandise, o1 
the habitual resort of a given group of customers to ~ 
particular shop or merchant, or a monopolistic control o1 
limitation of price and supply, then the resulting item of 
assets will be “intangible,” since the object to which the 
capitalised value in question is imputed is an immaterié 
object. If the fact which is by imputation made th 


On the Nature of Capital 371 


bearer of the capitalised value is a material object, as, e.g., 
the merchantable goods of which the supply is arbitrarily 
limited or the price arbitrarily fixed, or if it is the material 
means of supplying such goods, then the capitalised value 
in question is a case of tangible assets. The value in- 
volved is, like all value, a matter of imputation, and as 
assets it is a matter of capitalisation; but capitalisation 
is an appraisement of a pecuniary “ income-stream ” in 
terms of the vendible objects to the ownership of which 
the income is assumed to inure. To what object the cap- 
italised value of the “income-stream” shall be imputed 
is a question of what object of ownership secures to the 
owner an effectual claim on this “ income-stream ”; that 
is to say, it is a question of what object of ownership the 
strategic advantages is assumed to attach to, which is a 
question of the play of business exigencies in the given 
case. 

The “income-stream” in question is a pecuniary in- 
come-stream, and is in the last resort traceable to trans- 
actions of sale. Within the confines of business — and 
therefore within the scope of capital, investments, assets, 
and the like business concepts — transactions of purchase 
and sale are the final terms of any analysis. But beyond 
these confines, comprehending and conditioning the busi- 
mess system, lie the material facts of the community’s 
work and livelihood. In the final transaction of sale the 
‘merchantable goods are valued by the consumer, not as 
assets, but as livelihood;°® and in the last analysis and 
long run it is to some such transaction that all business 
imputations of value and capitalistic appraisement of 


_ ® “Livelihood” is, of course, here taken in a loose sense, not as 
denoting the means of subsistence simply or even the means of 
Physical comfort, but as signifying that the purchases in question 
‘are made with a view to the consumptive use of the goods rather 
than with a view to their use for a profit. 


; 
: 


~ 


372 On the Nature of Capital 


assets must have regard and by which they must finally 
be checked. Dissociated from the facts of work and 
livelihood, therefore, assets cease to be assets; but thi 
does not preclude their relation to these facts of work 
and livelihood being at times somewhat remote and loose.. 

Without recourse, immediately or remotely, to certain 
material facts of industrial process and equipment, assets 
would not yield earnings; that is to say, wholly disjoined 
from these material facts, they would in effect not be 
assets. This is true for both tangible and intangible as- 
sets, although the relation of the assets to the material 
facts of industry is not the same in the two cases. The 
case of tangible assets needs no argument. Intangible 
assets, suchas patent right or monopolistic control, are 
likewise of no effect except in effectual contact with in- 
dustrial facts. The patent right becomes effective for 
the purpose only in the material working of the innova- 
tion covered by it; and monopolistic control is a source 
of gain only in so far as it effectually modifies or divides 
the supply of goods. 

In the light of these considerations it seems feasible t 
indicate both the congruence and the distinction betweet 
the two categories of assets a little more narrowly that 
was done above. Both are assets,— that is to say, both 
are values determined by a capitalisation of anticipatec 
income-yielding capacity; both depend for their income 
yielding capacity on the preferential use of certain im 
material factors; both depend for their efficiency on thi 
use of certain material objects; both may increase or de 


facts of brute nature under the laws of physical cause an 


On the Nature of Capital 373 


effect,— this preferential use being secured by the owner- 
ship of material articles employed in the processes in 
which these expedients are put into effect. The intan- 
gible assets capitalise the preferential use of certain facts 
of human nature — habits, propensities, beliefs, aspira- 
tions, necessities — to be dealt with under the psycholog- 
ical laws of human motivation; this preferential use be- 
ing secured by custom, as in the case of old-fashioned 
good-will, by legal assignment, as in patent or copyright, 
by ownership of the instruments of production, as in the 
case of industrial monopolies.*° 


Intangible assets are capital as well as tangible assets; 
that is to say, they are items of capitalised wealth. Both 
categories of assets, therefore, represent expected “in- 
come-streams ” which are of such definite character as to 
admit of their being rated in set terms per cent. per time 
unit ; although the expected income need not therefore be 
anticipated to come in an even flow or to be distributed 
in any equable manner over a period of time. The in- 
come-streams to be so rated and capitalised are associated 
in such a manner with some external fact (impersonal to 
their claimant), whether material or immaterial, as to 
permit their being traced or attributed to an income-yield- 
ing capacity on the part of this external fact, to which 
their valuation as a whole may be imputed and which 
may then be capitalised as an item of wealth yielding 
this income-stream. Income-streams which do not meet 


10 The instruments of production so monopolised are, of course, 
tangible assets, but the ownership of such means of production in 
amount sufficient to enable the owner to monopolise or control 
the market, whether for purchase (as of materials or labor) or 
for sale (as of marketable goods or services), gives rise to a 
differential business advantage which is to be classed as intangi- 
ble assets. 


374 On the Nature of Capital 


these requirements do not give rise to assets in the ac 
cepted sense of the term, and so do not swell the volume 
of capitalised wealth. j 

There are income-streams which do not meet the neces- 
sary specifications of capitalisable wealth; and in modern 
business traffic, particularly, there are large and sec 
sources of income that are in this way not capitalisa 
and yet yield a legitimate business income. Such a 
indeed, to be rated among the most consequential fac 
in the current business situation. Under the guida 
of traditions carried over from a more primitive busin 
situation, it has been usual to speak of income-strea 
derived in such a manner as “ wages of superintendence, 
or “ undertaker’s wages,” or “‘ entrepreneur’s profits,” 
latterly, as “profits” simply and specifically. Sue 
phenomena of this class as are of consequence in busin 
are commonly accounted for, theoretically, under 
head; and the effort so to account for them is to be t. 
as, at least, a laudable endeavor to avoid an undue mul 
plication of technical terms and categories.* Yet 
most striking phenomena of this class, and the most co 
sequential for modern business and industry, both 
respect of their magnitude and in respect of the pecunia 
dominion and discretion which they represent, cant 
well be accounted undertaker’s gains, in the ordi 
sense of that term. The great gains of the great in 
trial financiers or of the great “interests,” e.g., do ; 
answer the description of undertaker’s gains, in that th 
do not accrue to the captain of industry on the basis | of 


11 One writer even goes so far in the endeavor to bring t 
facts within the scope of the staple concepts of theory at 
point as to rate the persons concerned in such a case as “ capi- 
tal,” after having satisfied himself that such income-streams are 
traceable to a personal source— See Fisher, Nature of Capa 
and Income, chap. v. 


On the Nature of Capital 375 


his “managerial ability” alone, apart from his wealth 
or out of relation to his wealth; and yet it is not safe to 
say that such gains (which are over and above ordinary 
returns on his investments) accrue on the ground of the 
requisite amount of wealth alone, apart from the exercise 
of a large business direction on the part of the owner of 
such wealth, or on the part of his agent to whom discre- 


_ tion has been delegated. Administrative, or strategic, dis- 


cretion and activity must necessarily be present in the 
case: otherwise, the income in question would rightly be 
tated as income from capital simply. 

The captain of industry, the pecuniary magnate, is nor- 
mally in receipt of income in excess of the ordinary rate 
per cent. on investment; but apart from his large hold- 
ings he is not in a position to get these large gains. 
Dissociated from his large holdings, he is not a large cap- 
tain of industry ; but it is not the size of his holdings alone 
that determines what the gains of the pecuniary magnate 
in modern industry shall be. Gains of the kind and mag- 
nitude that currently come to this class of business men 
come only on condition that the owner (or his agent) 
shall exercise a similarly large discretion and control in 
the affairs of the business community ; but the magnitude 
of the gains, as well as of the discretion and control ex- 


-ercised, is somewhat definitely conditioned by the magni- 


tude of the wealth which gives effect to this discretion. 
The disposition of pecuniary forces in such matters 
may be well seen in the work and remuneration of any 
coalition of “ interests,” such as the modern business com- 
munity has become familiar with. The “interests” in 
such a case are of a personal character,— they are “ inter- 
ested parties,”— and the sagacity, experience, and animus 
of these various interested parties counts in the outcome, 
‘both as regards the aggregate gains of the coalition and 


376 On the Nature of Capital 


as regards the distribution of these gains among the sey- 
eral parties in interest; but the weight of any given “ in- 
terest” in a coalition or “system” is more nearly pro- 
portioned to the wealth controlled by the given “ inter- 
st,” and to the strategic position of such wealth, than to 
any personal talents or proficiency of the “ interested 
party.” The talents and proficiency involved are not th 
main facts. Indeed, the movements of such a “ system,’ 
and of the several component “ interests,” are largely < 
matter of artless routine, in which the greatest ingenuity 
and initiative engaged in the premises are commonly exer- 
cised by the legal counsel working for a fee. 
A dispassionate student of the current business traffic, 
who is not overawed by round numbers, will be more im- 
pressed by the ease and simplicity of the manceuvers 
that lead to large pecuniary results in the higher business 
finance than by any evidence of preéminent sagacity and 
initiative among the pecuniary magnates. One need only 
call to mind the simple and obvious way in which the 
promoters of the Steel Corporation were magnificently 
checkmated by the financiers of the Carnegie “ interest,’ 
when that great and reluctant corporation was floated 
or the pettyfogging tactics of Standard Oil in its later 
career. In extenuation of their visible lack of initiative 
and insight it may not be ungraceful to call to mind tha 
many of the discretionary heads of the great “ interests ” 
are men of advanced years, and that in the nature of the 
case the pecuniary magnates of the present generation 
must commonly be men of a somewhat advanced age, 
and it is only during the present generation that the exist 
ing situation has arisen, with its characteristic opportunt 
ties and demands. To take their present foremost rank 
in the new business finance which is here under inquiry 
they have had to accumulate the great wealth on which 


On the Nature of Capital 377 


alone their discretionary control of business affairs rests, 
and their best vigor has been spent in this work of prepa- 
ration; so that they have commonly attained the requisite 
‘strategic position only after they had outlived their “ years 
of discretion.” 

But there is no intention here to depreciate the work of 
the pecuniary magnates or the spokesmen of the great 
“interests.” The matter has been referred to only as it 
bears on this category of capitalistic income which ac- 
crues on other grounds than the “ earning-capacity” of 
the assets involved, and which still cannot be imputed 
to the “earning-capacity ” of these business men apart 
from these assets. The case is evidently not one of 
“wages of superintendence” or “ undertaker’s profits ”’; 
but it is as evidently not a case of the earning-capacity 
of the assets. The proof of the latter point is quite as 
easy as of the former. If the gains of the “system” or 
of its constituent “ interests’ and magnates were imput- 
able to the earning-capacity of the assets involved,— in 
any accepted sense of “ earnings,’— then it would imme- 
diately follow that these assets would be recapitalised on 
the basis of these extraordinary earnings, and that the 
income derived in this class of traffic should reappear as 
interest or dividends on the capital so increased to cor- 
respond with the increased earnings. But such recap- 
italisation takes place only to a relatively very limited ex- 
‘tent, and the question then bears on the income which is 
not so accounted for in the recapitalisation. 

_ The gains of this class of traffic are, of course, them- 
‘selves capitalised, for the most part they accrue in the 
capitalised form, as issues of securities and the like; but 
the sources of this income are not capitalised as such. 
‘The (large) accumulated wealth, or assets, which gives 
weight to the movements of the “ interests ” and magnates 


378 On the Nature of Capital 


in question, and which affords the ground for the discre. 
tionary control of business affairs exercised by them, are 
for the most part at least, invested in ordinary busines 
ventures, in the form of corporation securities and th 
like, and are there earning dividends or interest at cur 
rent rates; and these assets are valued in the market (an 
thereby capitalised) on the basis of their current earr 
ings in the various enterprises in which they are so if 
vested. But their being so invested in profitable busines 
enterprises does not in the least hinder their usefulnes 
in the hands of the magnates as a basis or means of carr} 
ing on the large and highly profitable transactions of tl 
higher industrial finance. To impute these gains to thes 
assets as “earnings,” therefore, would be to count th 
assets twice as capital, or rather to count them over and 
over. 
An additional perplexity in endeavoring to handle gains 
of this class theoretically as earnings, in the ordinary 
sense, arises from the fact that they stand in no defi 
able time relation to their underlying assets. They h 
no definable ‘“ time-shape,” as Mr. Fisher might put it! 
Such gains are timeless, in the sense that the time relation 
does not count in any substantial manner or in any sensi 
ble degree in their determination.%® 


In a more painstaking statement of this point of thec ry 
it would be necessary to note that these gains are “t 
less,” in the sense indicated, in so far as the enterprist 


12 Cf. Fisher, Rate of Interest, chap. vi. 
13 This conclusion is reached, e.g., by Mr. G. P. Watkins (Th 
Growth of Large Fortunes, chap. iii, sec. 10), althoug 
through a curious etymological misapprehension he rejects f 
term ‘‘timeless” as not available. 


, On the Nature of Capital 379 


80 far. Technological (industrial) procedure, being of 
the nature of physical causation, is subject to the time 
tion under which causal sequence runs. This is the 
“basis of such discussions of capital and interest as those 
of Bohm- Bawerk, and of Fisher. But business traffic, 
as distinguished from the processes of industry, being 
“not immediately concerned with the technological process, 
is also not immediately or uniformly subject to the time 
‘relation involved in the causal sequence of the technolog- 
ical process. Business traffic is subject to the time re- 
‘lation because and in so far as it depends upon and fol- 
lows up the processes of production. The commonplace 
or old-fashioned business enterprise, the competitive sys- 
tem of investment in industrial business simply, com- 
monly rests pretty directly on the due sequence of the 
‘industrial processes in which the investments of such 
“enterprise are placed. Such enterprise, as conceived by 
_ the current theories of capital, does business at first hand 
in the industrial efficiency of the community, which is 
conditioned by the time relation of the causal sequence, 
“and which is, indeed, in great measure a function of the 
e consumed in the technological processes. There- 

: fore, the gains, as well as the transactions, of such enter- 
prise are also commonly somewhat closely conditioned by 
the like time relation, and they typically emerge under 
ne form of a per-cent. per time unit; that is to say, as a 
function of the lapse of time. Yet the business trans- 
actions themselves are not a matter of the lapse of time. 
fime is not of the essence of the case. The magnitude 
of a pecuniary transaction is not a function of the time 
‘consumed in concluding it, nor are the gains which accrue 
fom the transaction. In business enterprise on the 
her plane, which is here under inquiry, the relation of 
e transactions, and of their gains, to the consecution 


a 
ti 


380 On the Nature of Capital 


of the technological processes remotely underlying them 
is distant, loose, and uncertain, so that the time element 
here does not obtrude itself: rather, it somewhat obviously 
falls into abeyance, marking the degree of its remoteness. 
Yet this phase of business enterprise, like any other, of 
course takes place in time; and, it is also to be remarked, 
the volume of the traffic and the gains derived from it are, 
no doubt, somewhat closely conditioned in the long run 
by the time relation which dominates that technological 
(industrial) efficiency on which this enterprise, too, ulti- 
mately and indirectly rests and from which in the last 
resort its gains are finally drawn, however remotely and 
indirectly. 
An analysis of these phenomena on lines similar te 
those which have been followed in the discussion of as- 
sets above is not without difficulty, nor can it fairly b 
expected to yield any but tentative and provisional re 
sults. The matter has received so little attention fron 
economic theoreticians that even significant mistakes it 
this connection are of very rare occurrence.** The causé 
of this scant attention to these matters lies, no doubt, in 
the relative novelty of the facts in question. The fact 
may be roughly drawn together under the caption “ Tra 
fic in Vendible Capital ” ; although that term serves rathe 
as a comprehensive designation of the class of busines 
enterprise from which these gains accrue than as af 
adequate chararacterisation of the play of forces im 
volved.*®> Traffic in vendible capital has not been um 


ficial generalisation to class these gains as “ speculative,” and 5 
to excuse himself from a closer acquaintance with their charat- 
ter and with the bearings of the class of business enterprise out 
of which they arise. 

15Cf. Theory of Business Enterprise, chap. v, pp. 119-130; 
chap. vi, pp. 162-174. ' 


On the Nature of Capital 381 


known in the past, but it is only recently that it has come 
into the foreground as the most important line of business 
enterprise. Such it now is, in that it is in this traffic 
that the ultimate initiative and discretion in business are 
now to be found. It is at the same time the most gainful 
of business enterprise, not only in absolute terms, but 
Telatively to the magnitude of the assets involved as well. 
One reason for this superior gainfulness is the fact that 
the assets involved in this traffic are at the same time 
engaged as assets to their full extent in ordinary busi- 
ness, so that the peculiar gains of this traffic are of the 
nature of a bonus above the earnings of the invested 
wealth. “It is like finding money.” 

As was said above, the method, or the ways and means, 
characteristic of this superior business enterprise is a 
traffic in vendible capital. The wealth gained in this 
field is commonly in the capitalised form, and constitutes 
in each transaction, or “ deal,” a deduction or abstraction 
from the capitalised wealth of the business community 
in favor of the magnates or “ interests” to whom the 
gains accrue. Its proximate aim is a transfer of capital- 
ised wealth from other capitalists to those who so gain. 
This transfer or abstraction of capitalised wealth from 
_the former owners is commonly effected by an augmenta- 
tion of the nominal capital, based on a (transient) advan- 
tage inuring to the particular concerns whose capitalisa- 
tion is so augmented.1° Any such increase of the com- 
| munity’s aggregate capitalisation, without a correspond- 
ing increase of the material wealth on which the capitali- 
sation is based, involves, of course, in effect a redistribu- 
tion of the aggregate capitalised wealth; and in this re- 
distribution the great financiers are in a position to gain. 
The gains in question, it will be seen, come out of the 


16 Cf. Theory of Business Enterprise, footnote on pp. 169-170. 


gee) i On the Nature of Capital 


business community, out of invested wealth, and only re- 
motely and indirectly out of the community at large from 
which the business community draws its income. These 
gains, therefore, are a tax on commonplace business enter: 
prise, in much the same manner and with much the like 
effects as the gains of commonplace business (ordinary 
profits and interest) are a tax on industry.” 

In a manner analogous to the old-fashioned capitalist- 
employer’s engrossing of the industrial community’s tech- 
nological efficiency does the modern pecuniary magnate 
engross the business community’s capitalistic efficiency 
This capitalistic efficiency lies in the capitalist-employer’s 
ability — by force of the ownership of the material equip- 
ment — to induce the industrial community, through suit 
able bargaining, to turn over to the owner of the material 
equipment the excess of the product above the industrial 
community’s livelihood. The fortunes of the capitalist 
employer are closely dependent on the run of the marke 
—the conjunctures of advantageous purchase and sale 
and it is his constant endeavor to create or gain for him 
self some peculiar degree of advantage in the market, 
the way of monopoly, good-will, legalised privilege, and 
the like,— something in the way of intangible assets 
But the pecuniary magnate, in the measure in which 
truly answers to the concept, is superior to the market of 


ee 


17 As should be evident from the run of the argument in th 
earlier portions of this paper, the use of the words “tax,” “ de 
duction,” “ abstraction,” in this connection, is not to be taken 2 
implying approval or disapproval of the phenomena so characte’ 
ised. The words are used for want of better terms to int 
the source of business gains, and objectively to characterise the 
relation of give-and-take between industry and ordinary capita 
istic business, on the one hand, and between ordinary busine 
and this business enterprise on the higher plane, on the other 
hand. 


; On the Nature of Capital 383 
‘mar its conjunctures of advantageous purchase and sale 
of goods ; that is to say, he is in a position to make or mar 
any peculiar advantage possessed by the given capitalist- 
employer who comes in his way. He does this by force 
of his large holdings of capital at large, the weight of 
which he can shift from one point of investment to an- 
other as the relative efficiency — earning-capacity — of 
one and another line of investment may make it expedient ; 
and at each move of this kind, in so far as it is effective 
for his ends, he cuts into and assimilates a fraction of 
the invested wealth involved, in that he cuts into and 
sequesters a fraction of the capital’s earning-capacity in 
the given line. That is to say, in the measure in which he 
is a pecuniary magnate, and not simply a capitalist- 
employer, he engrosses the capitalistic efficiency of in- 
vested wealth; he turns to his own account the capitalist- 
employer’s effectual engrossing of the community’s in- 
dustrial efficiency. He engrosses the community’s pe- 
cuniary initiative and proficiency. In the measure, there- 
fore, in which this relatively new-found serviceability of 
extraordinarily large wealth is effective for its peculiar 
business function, the old-fashioned capitalist-employer 
loses his discretionary initiative and becomes a mediator, 
an instrumentality of extraction and transmission, a col- 
lector and conveyer of revenue from the community at 
large to the pecuniary magnate, who, in the ideal case, 
should leave him only such an allowance out of the gross 
farnings collected and transmitted as will induce him to 
continue in business. 

- To the community at large, whose industrial efficiency 
is already virtually engrossed by the capitalist-employer’s 
‘Ownership and control of the material equipment, this 
later step in the evolution of the economic situation 
a." apparently not be a matter of substantial conse- 


1. 
eo 


| oo 


384 On the Nature of Capital 


quence or a matter for sentimental disturbance. On 
the face of it, it should appear to have little more than 
a speculative interest for those classes of the community 
who do not derive an income from investments ; particu- 
larly not for the working classes, who own nothing to 
speak of and whose only dependence is their technolog- 
ical efficiency, which has virtually ceased to be their own. 
But such is not the current state of sentiment. This in- 
choate new phase of capitalism, this business enterprise 
on the higher plane, is in fact viewed with the most lively 
apprehension. Ina maze of consternation and solicitude 
the boldest, wisest, most public-spirited, most illustrious 
gentlemen of our time are spending their manhood in ar 
endeavor to make the hen continue sitting on the nest 
after the chickens are out of the shell. The modern com- 
munity is imbued with business principles —of the old 
dispensation. By precept and example, men have learned 
that the business interests (of the authentic superannu- 
ated scale and kind) are the palladium of our civilisation, 
as Mr. Dooley would say; and it is felt that any disturb 
ance of the existing pecuniary dominion of the capitalist 
employer — as contrasted with the pecuniary magnate 
would involve the well-being of the community in one 
common agony of desolation. 

The merits of this perturbation, or of the remedies 
proposed for saving the pecuniary life of the old-fash- 
ioned capitalist-employer, of course do not concern the 
present inquiry ; but the matter has been referred to here 
as evidence that the pecuniary magnate’s work, and th 
dominion which his extraordinarily large wealth gives 
him, are, in effect, substantially a new phase of the eco 
nomic development, and that these phenomena are dis-_ 
tastefully unfamiliar and are felt to be consequential 
enough to threaten the received institutional structure 


On the Nature of Capital 385 


That is to say, it is felt to be a new phase of business 
enterprise,— distasteful to those who stand to lose by it. 
The basis of this business enterprise on the higher plane 
is capital-at-large, as distinguished from capital invested 
in a given line of industrial enterprise, and it becomes 
effective when wealth has accumulated in holdings suffi- 
ciently large to give the holder (or combination of hold- 
ers, the “system ”) a controlling weight in any group or 
ramification of business interests into which he may throw 
his weight by judicious investment (or by underwriting 
and the like). The pecuniary magnate must be able ef- 
fectually to engross the pecuniary initiative and the busi- 
ness opportunities on which such a section or ramification 
of the business community depends for its ordinary gains. 
How large a proportion of the business community’s 
capital is needed for such an effectual engrossing of its 
capitalistic efficiency, in any given bearing, is a question 
that cannot be answered in anything like absolute terms, 
or even in relative terms of a satisfactorily definite kind. 
It is, of course, evident that a relatively large disposable 
body of capital is needed for such a purpose; and it is 
also evident, from the current facts of business, that the 
body of capital so disposed of need not amount to a ma- 
jority, or anything near a majority, of the investments 
involved,— at least not at the present relatively inchoate 
phase of this larger business enterprise. The larger the 
holdings of the magnate, the more effectual and expedi- 
tious will be his work of absorbing the holdings of the 
smaller capitalist-employer, and the more precipitately 
will the latter yield his assets to the new claimant. 
Evidently, this work of the pecuniary magnate bears 
a great resemblance to the creation of intangible assets 
under the ordinary competitive system. This is, no doubt, 
the point of its nearest relation to the current capitalistic 


386 On the Nature of Capital 


enterprise. But, as has already been indicated above, it 
cannot be said that the magnate’s peculiar work is the 
creation of intangible, or other assets, although there is 
commonly some recapitalisation involved in his manceuy- 
ers, and although his gains commonly come as assets, 7.¢., 
in the capitalised form. Nor can it, as has also been 
indicated above, be said that the wealth which serves him 
as the means of his peculiar enterprise stands in the — 
relation of assets to this enterprise or to the gains in 
question, since this wealth already stands in an exhaustive 
relation as assets to some corporate enterprise in ordi- 
nary business and to the corresponding items of interest 
and dividends. It may, of course, be contended that the 
present state of things on this higher plane of enterprise 
is transient and transitional only, and that in the settled 
condition which may conceivably supervene, the mag- 
nate’s relation to business at large will be capitalised in 
some form of intangible assets, after the manner in which | 
the monopoly advantage of an ordinary “ trust” is now 
capitalised. But this is at the best only a surmise, guided 
by inapplicable generalisations drawn from a past situa- 
tion in which this higher enterprise has not engrossed 
the pecuniary initiative and played the ruling part. 


SOME NEGLECTED POINTS IN THE 
THEORY OF SOCIALISM * 


THE immediate occasion for the writing of this paper 
was given by the publication of Mr. Spencer’s essay, 
“From Freedom to Bondage ”;? although it is not alto- 
gether a criticism of that essay. It is not my purpose 
to controvert the position taken by Mr. Spencer as re- 
gards the present feasibility of any socialist scheme. 
The paper is mainly a suggestion, offered in the spirit 
of the disciple, with respect to a point not adequately 
covered by Mr. Spencer’s discussion, and which has 
received but very scanty attention at the hands of any 
other writer on either side of the socialist controversy. 
This main point is as to an economic ground, as a matter 
of fact, for the existing unrest that finds expression in 
the demands of socialist agitators. 

I quote from Mr. Spencer’s essay a sentence which does 
fair justice, so far as it goes, to the position taken by 
agitators: “In presence of obvious improvements, joined 
with that increase of longevity, which even alone yields 
conclusive proof of general amelioration, it is proclaimed, 
with increasing vehemence, that things are so bad that 
society must be pulled to pieces and reorganised on an- 
other plan.” The most obtrusive feature of the change 
demanded by the advocates of socialism is governmental 
control of the industrial activities of society —the na- 


1Reprinted by permission from the Annals of American 
Academy of Political and Social Science, Vol. Il, 1892. 
2Introductory paper of A Plea for Liberty; edited by Thomas 
Mackay. 
387 


388 The Theory of Socialism 


tionalisation of industry. There is also, just at pres- 
ent, a distinct movement in practice, towards a more ex- — 
tended control of industry by the government, as Mr. 
Spencer has pointed out. This movement strengthens 
the position of the advocates of a complete nationalisa- 
tion of industry, by making it appear that the logic of 
events is on their side. 

In America at least, this movement in the direction of 
a broader assertion of the paramount claims of the com- 
munity, and an extension of corporate action on part of 
the community in industrial matters, has not generally — 
been connected with or based on an adherence to social- 
istic dogmas. This is perhaps truer of the recent past 
than of the immediate present. The motive of the move- 
ment has been, in large part, the expediency of each par- © 
ticular step taken. Municipal supervision, and, possibly, 
complete municipal control, has come to be a necessity — 
in the case of such industries — mostly of recent growth 
—as elementary education, street-lighting, water-supply, 
etc. Opinions differ widely as to how far the com- 
munity should take into its own hands such industries | 
as concern the common welfare, but the growth of senti- — 
ment may fairly be said to favor a wider scope of govern- 
mental control. 

But the necessity of some supervision in the interest 
of the public extends to industries which are not simply — 
of municipal importance. The modern development of 
industry and of the industrial organisation of society 
makes it increasingly necessary that certain industries — 
often spoken of as “natural monopolies ”— should be 
treated as being of a semi-public character. And through 
the action of the same forces a constantly increasing num- 
ber of occupations are developing into the form of “ nat-— 
ural monopolies.” . 


— 


The Theory of Socialism 389 


The motive of the movement towards corporate action 
on the part of the community — State control of indus- 
try—has been largely that of industrial expediency. 
But another motive has gone with this one, and has 
grown more prominent as the popular demands in this 
direction have gathered wider support and taken more 
definite form. The injustice, the inequality, of the exist- 
ing system, so far as concerns these natural monopolies 
especially, are made much of. There is a distinct unrest 
abroad, a discontent with things as they are, and the cry 
of injustice is the expression of this more or less widely 
prevalent discontent. This discontent is the truly social- 
istic element in the situation. 

It is easy to make too much of this popular unrest. 
The clamor of the agitators might be taken to indicate 
a wider prevalence and a greater acuteness of popular 
discontent than actually exists; but after all due allow- 
ance is made for exaggeration on the part of those inter- 
ested in the agitation, there can still be no doubt of the 
presence of a chronic feeling of dissatisfaction with the 
working of the existing industrial system, and a growth 
of popular sentiment in favor of a leveling policy. The 
economic ground of this popular feeling must be found, 
if we wish to understand the significance, for our indus- 
trial system, of the movement to which it supplies the 
motive. Ii its causes shall appear to be of a transient 
character, there is little reason to apprehend a permanent 
or radical change of our industrial system as the outcome 
of the agitation; while if this popular sentiment is found 
to be the outgrowth of any of the essential features of 
the existing social system, the chances of its ultimately 
working a radical change in the system will be much 
greater. 

The explanation offered by Mr. Spencer, that the popu- 


390 The Theory of Socialism 


lar unrest is due essentially to a feeling of ennui —to a 
desire for a change of posture on part of the social body, © 
is assuredly not to be summarily rejected; but the analogy 
will hardly serve to explain the sentiment away. This — 
may be a cause, but it can hardly be accepted as a suffi- 
cient cause. 

Socialist agitators urge that the existing system is nec- 
essarily wasteful and industrially inefficient. That may 
be granted, but it does not serve to explain the popular 
discontent, because the popular opinion, in which the 
discontent resides, does notoriously not favor that view. 
They further urge that the existing system is unjust, in 
that it gives an advantage to one man over another. That 
contention may also be true, but it is in itself no explana- 
tion, for it is true only if it be granted that the institu- 
tions which make this advantage of one man over an-— 
other possible are unjust, and that is begging the ques- 
tion. This last contention is, however, not so far out 
of line with popular sentiment. The advantage com- 
plained of lies, under modern conditions, in the posses- 
sion of property, and there is a feeling abroad that the 
existing order of things affords an undue advantage to 
property, especially to owners of property whose posses- 
sions rise much above a certain rather indefinite average. 
This feeling of injured justice is not always distinguish- 
able from envy ; but it is, at any rate, a factor that works 
towards a leveling policy. With it goes a feeling of 
slighted manhood, which works in the same direction. 
Both these elements are to a great extent of a subjective 
origin. They express themselves in the general, objec- 
tive form, but it is safe to say that on the average they 
spring from a consciousness of disadvantage and slight 
suffered by the person expressing them, and by persons — 
whom he classes with himself. No flippancy is intended 


The Theory of Socialism 391 


in saying that the rich are not so generally alive to the 
necessity of any leveling policy as are people of slender 
means. Any question as to the legitimacy of the dis- 
satisfaction, on moral grounds, or even on grounds of 
expediency, is not very much to the point; the question 
is as to its scope and its chances of persistence. 

The modern industrial system is based on the institu- 
tion of private property under free competition, and it 
cannot be claimed that these institutions have heretofore 
worked to the detriment of the material interests of the 
average member of society. The ground of discontent 
cannot lie in a disadvantageous comparison of the pres- 
ent with the past, so far as material interests are con- 
cerned. It is notorious, and, practically, none of the agi- 
tators deny, that the system of industrial competition, 
based on private property, has brought about, or has at 
least co-existed with, the most rapid advance in average 
wealth and industrial efficiency that the world has seen. 
Especially can it fairly be claimed that the result of the 
last few decades of our industrial development has been 
to increase greatly the creature comforts within the reach 
of the average human being. And, decidedly, the result 
has been an amelioration of the lot of the less favored 
in a relatively greater degree than that of those eco- 
nomically more fortunate. The claim that the system of 
competition has proved itself an engine for making the 


rich richer and the poor poorer has the fascination of 


epigram ; but if its meaning is that the lot of the aver- 
age, of the masses of humanity in civilised life, is worse 
to-day, as measured in the means of livelihood, than it 
was twenty, or fifty, or a hundred years ago, then it is 
farcical. The cause of discontent must be sought else- 
where than in any increased difficulty in obtaining the 
means of subsistence or of comfort. But there is a sense 


392 The Theory of Socialism 


in which the aphorism is true, and in it lies at least a 
partial explanation of the unrest which our conservative 
people so greatly deprecate. The existing system has not 
made, and does not tend to make, the industrious poor 
poorer as measured absolutely in means of livelihood; 
but it does tend to make them relatively poorer, in their 
own eyes, as measured in terms of comparative economic 
importance, and, curious as it may seem at first sight, 
that is what seems to count. It is not the abjectly poor 
that are oftenest heard protesting; and when a protest is 
heard in their behalf it is through spokesmen who are 
from outside their own class, and who are not delegated 
to speak for them. They are not a negligible element in 
the situation, but the unrest which is ground for solici- 
tude does not owe its importance to them. The protest 
comes from those who do not habitually, or of necessity, 
suffer physical privation. The qualification “of neces- 
sity,” is to be noticed. There is a not inconsiderable 
amount of physical privation suffered by many people 
in this country, which is not physically necessary. The 
cause is very often that what might be the means of 
comfort is diverted to the purpose of maintaining a de- 
cent appearance, or even a show of luxury. 

Man as we find him to-day has much regard to his 
good fame — to his standing in the esteem of his fellow- 
men. This characteristic he always has had, and no ~ 
doubt always will have. This regard for reputation may © 
take the noble form of a striving after a good name; 
but the existing organisation of society does not in any 
way preéminently foster that line of development. Re- 
gard for one’s reputation means, in the average of cases, 
emulation. It is a striving to be, and more immediately 
to be thought to be, better than one’s neighbor. Now, 
modern society, the society in which competition withou 


: The Theory of Socialism 393 


prescription is predominant, is preéminently an industrial, 
economic society, and it is industrial — economic — excel- 
lence that most readily attracts the approving regard of 
that society. Integrity and personal worth will, of course, 
count for something, now as always; but in the case of a 
person of moderate pretentions and opportunities, such as 
the average of us are, one’s reputation for excellence in 
this direction does not penetrate far enough into the very 
wide environment to which a person is exposed in modern 
society to satisfy even a very modest craving for respec- 
tability. To sustain one’s dignity — and to sustain one’s 
self-respect — under the eyes of people who are not so- 
‘cially one’s immediate neighbors, it is necessary to dis- 
play the token of economic worth, which practically coin- 
cides pretty closely with economic success. A person may 
be well-born and virtuous, but those attributes will not 
bring respect to the bearer from people who are not aware 
bof his possessing them, and these are ninety-nine out of 
‘every one hundred that one meets. Conversely, by the 
way, knavery and vulgarity in any person are not repro- 
bated by people who know nothing of the person’s short- 
comings in those respects. 
In our fundamentally industrial society a person should 
‘be economically successful, if he would enjoy the esteem 
of his fellowmen. When we say that a man is “ worth” 
‘so many dollars, the expression does not convey the idea 
‘that moral or other personal excellence is to be measured 
in terms of money, but it does very distinctly convey the 
idea that the fact of his possessing many dollars is very 
much to his credit. And, except in cases of extraordinary 
excellence, efficiency in any direction which is not imme- 
diately of industrial importance, and does not redound to 
person’s economic benefit, is not of great value as a 
‘means of respectability. Economic success is in our day 


3 
: 
ba 
E 
3 


Re 
| 


304 The Theory of Socialism 


the most widely accepted as well as the most readily ascer- 
tainable measure of esteem. All this will hold with still 
greater force of a generation which is born into a world 
already encrusted with this habit of a mind. 

But there is a further, secondary stage in the develop- 
ment of this economic emulation. It is not enough to 
possess the talisman of industrial success. In order that 
it may mend one’s good fame efficiently, it is necessary to 
display it. One does not “ make much of a showing” in 
the eyes of the large majority of the people whom one 
meets with, except by unremitting demonstration of abil 
ity to pay. That is practically the only means which the 
average of us have of impressing our respectability on the ° 
many to whom we are personally unknown, but whose 
transient good opinion we would so gladly enjoy. So it 
comes about that the appearance of success is very much 
to be desired, and is even in many cases preferred to the 
substance. We all know how nearly indispensable it is 
to afford whatever expenditure other people with whom 
we class ourselves can afford, and also that it is desirable 
to afford a little something more than others. 

This element of human nature has much to do with the 
“ standard of living.” And it is of a very elastic nature 
capable of an indefinite extension. After making proper 
allowance for individual exceptions and for the action of 
prudential restraints, it may be said, in a general way, tha 
this emulation in expenditure stands ever ready to absork 
any margin of income that remains after ordinary physi 
cal wants and comforts have been provided for, and, fur 
ther, that it presently becomes as hard to give up that par 
of one’s habitual “ standard of living ” which is due to thi 
struggle for respectability, as it is to give up many physi 
cal comforts. Ina general way, the need of expenditure 
in this direction grows as fast as the means of satisfyin 


The Theory of Socialism 395 


it, and, in the long run, a large expenditure comes no 
“nearer satisfying the desire than a smaller one. 

It comes about through the working of this principle 
that even the creature comforts, which are in themselves 
desirable, and, it may even be, requisite to a life on a 
passably satisfactory plane, acquire a value as a means of 
respectability quite independent of, and out of proportion 
to, their simple utility as a means of livelihood. As we 
" are all aware, the chief element of value in many articles 
of apparel is not their efficiency for protecting the body, 
but for protecting the wearer’s respectability ; and that not 
only in the eyes of one’s neighbors but even in one’s own 
eyes. Indeed, it happens not very rarely that a person 
chooses to go ill-clad in order to be well dressed. Much 
more than half the value of what is worn by the American 
people may confidently be put down to the element of 
“dress,” rather than to that of “clothing.” And the 
chief motive of dress is emulation —‘ economic emula- 
tion.” The like is true, though perhaps in a less degree, 
of what goes to food and shelter. 

This misdirection of effort through the cravings of hu- 
man vanity is of course not anything new, nor is “ eco- 
nomic emulation” a modern fact. The modern system 
of industry has not invented emulation, nor has even this 
particular form of emulation originated under that sys- 
tem. But the system of free competition has accentuated 
this form of emulation, both by exalting the industrial 
activity of man above the rank which it held under more 
primitive forms of social organisation, and by in great 
Measure cutting off other forms of emulation from the 
chance of efficiently ministering to the craving for a good 
fame. Speaking generally and from the standpoint of 
the average man, the modern industrial organization of 
society has practically narrowed the scope of emulation 


396 The Theory of Socialism 


as very materially to widen the margin of human exertion 
that can be devoted to purposes of emulation. Further, 
by increasing the freedom of movement of the individual 
and widening the environment to which the individual is 
exposed — increasing the number of persons before whose 
eyes each one carries on his life, and, pari passu, decreas- 
ing the chances which such persons have of awarding 
their'esteem on any other basis than that of immediate 
appearances, it has increased the relative efficiency of the 
economic means of winning respect through a show of 
expenditure for personal comforts. 

It is not probable that further advance in the same di- 
rection will lead to a different result in the immediate 
future; and it is the immediate future we have to deal 
with. A further advance in the efficiency of our indus- 
try, and a further widening of the human environment t 
which the individual is exposed, should logically rendei 
emulation in this direction more intense. There are, in 
deed, certain considerations to be set off against this tend: 
ency, but they are mostly factors of slow action, and ar 
hardly of sufficient consequence to reverse the genera 
rule. On the whole, other things remaining the same, 1 


of the personal contact of each with his fellowmen, 
the greater the opportunity of each to compare notes wit 
his fellows, the greater will be the preponderance of eco 
nomic success as a means of emulation, and the greate 
the straining after economic respectability. Inasmuch as 
the aim of emulation is not any absolute degree of com- 
fort or of excellence, no advance in the average well 


The Theory of Socialism 397 


being of the community can end the struggle or lessen the 


strain. A general amelioration cannot quiet the unrest 
_whose source is the craving of everybody to compare fa- 


vorably with his neighbor. 

Human nature being what it is, the struggle of each to 
possess more than his neighbor is inseparable from the 
institution of private property. And also, human nature 
being what it is, one who possesses less will, on the aver- 
age, be jealous of the one who possesses more; and 
“more” means not more than the average share, but 
more than the share of the person who makes the com- 
parison. The criterion of complacency is, largely, the 
de facto possession or enjoyment; and the present growth 
of sentiment among the body of the people — who possess 
less — favors, in a vague way, a readjustment adverse 
to the interests of those who possess more, and adverse to 
the possibility of legitimately possessing or enjoying 
“more”; that is to say, the growth of sentiment favors 
a socialistic movement. The outcome of modern indus- 
trial development has been, so far as concerns the pres- 
ent purpose, to intensify emulation and the jealousy that 
goes with emulation, and to focus the emulation and the 
jealousy on the possession and enjoyment of material 
goods. The ground of the unrest with which we are con- 
cerned is, very largely, jealousy,— envy, if you choose; 


and the ground of this particular form of jealousy, that 


makes for socialism, is to be found in the institution of 
private property. With private property, under modern 
conditions, this jealousy and unrest are unavoidable. 
The corner-stone of the modern industrial system is the 
institution of private property. That institution is also 
the objective point of all attacks upon the existing system 
of competitive industry, whether open or covert, whether 
directed against the system as a whole or against any 


398 ‘The Theory of Socialism 


special feature of it. It is, moreover, the ultimate ground 
—and, under modern conditions, necessarily so — of the 
unrest and discontent whose proximate cause is the strug- 
gle for economic respectability. The inference seems to 
be that, human nature being what it is, there can be no, 
peace from this — it must be admitted — ignoble form of 
emulation, or from the discontent that goes with it, this 
side of the abolition of private property. Whether a 
larger measure of peace is in store for us after that event 
shall have come to pass, is of course not a matter to be 
counted on, nor is the question immediately to the point. 


motive, nor the most important feature, of modern indus- 
trial life ; although it is in the foreground, and it pervades 
the structure of modern society more thoroughly perhaps 
than any other equally powerful moral factor. It would 
be rash to predict that socialism will be the inevitable out- 
come of a continued development of this emulation a: d 
the discontent which it fosters, and it is by no means the 
purpose of this paper to insist on such an inference. The 
most that can be claimed is that this emulation is one of 
the causes, if not the chief cause, of the existing unrest 
and dissatisfaction with things as they are; that this un- 
rest is inseparable from the existing system of industrial 
organisation; and that the growth of popular sentiment 
under the influence of these conditions is necessarily ad- 
verse to the institution of private property, and therefore 
adverse to the existing industrial system of free compe- 
tition. 


The emulation to which attention has been called in the 
preceding section of this paper is not only a fact of im 
portance to an understanding of the unrest that is urging 


us towards an untried path in social development, but ii 


The Theory of Socialism 399 


ha also a bearing on the question of the practicability of 
an y scheme for the complete nationalisation of industry. 
Modern industry has developed to such a degree of effi- 
acy as to make the struggle of subsistence alone, under 
‘average conditions, relatively easy, as compared with the 
‘state of the case a few generations ago. As I have 
labored to show, the modern competitive system has at the 
‘same time given the spirit of emulation such a direction 
that the attainment of subsistence and comfort no longer 
‘fixes, even approximately, the limit of the required aggre- 
" gate labor on the part of the community. Under modern 
tonditions the struggle for existence has, in a very appre- 
ciable degree, been transformed into a struggle to keep up 
appearances. The ultimate ground of this struggle to 
‘keep up appearance by otherwise unnecessary expendi- 
ture, is the institution of private property. Under a ré- 
ime which should allow no inequality of acquisition or of 
ncome, this form of emulation, which is due to the possi- 
bility of such inequality, would also tend to become obso- 
te. With the abolition of private property, the charac- 
istic of human nature which now finds its exercise in 
this form of emulation, should logically find exercise in 
‘other, perhaps nobler and socially more serviceable, activi- 
_ ties; it is at any rate not easy to imagine it running into 
any line of action more futile or less worthy of human 
e tort. 
_ Supposing the standard of comfort of the community 
_ to remain approximately at its present average, the aboli- 
tion of the struggle to keep up economic appearances 
_ would very considerably lessen the aggregate amount of 
labor required for the support of the community. How 
| great a saving of labor might be effected is not easy to say. 
I believe it is within the mark to suppose that the struggle 
_ to keep up appearances is chargeable, directly and indi- 


400 The Theory of Socialism 


rectly, with one-half the aggregate labor, and abstinence 
from labor — for the standard of respectability require 
us to shun labor as well as to enjoy the fruits of it—on 
part of the American people. This does not mean that 
the same community, under a system not allowing private. 
property, could make its way with half the labor we now 
put forth; but it means something more or less nearl y 
approaching that. Any one who has not seen our modern 
social life from this point of view will find the claim 
absurdly extravagant, but the startling character of the 
proposition will wear off with longer and closer attention 
to this aspect of the facts of everyday life. But the ques- 
tion of the exact amount of waste due to this factor is 
immaterial. It will not be denied that is is a fact of con- 
siderable magnitude, and that is all that the argument 
requires. q 

It is accordingly competent for the advocates of the 
nationalisation of industry and property to claim that 
even if their scheme of organisation should prove less 
effective for production of goods than the present, as 


our industry, yet the community might readily be mair 
tained at the present average standard of comfort. Th 
required aggregate output of the nation’s industry would 
be considerably less than at present, and there woulc 
therefore be less necessity for that close and strenuous 
industrial organisation and discipline of the members of 
society under the new régime, whose evils unfriendly 
critics are apt to magnify. The chances of practicability 
for the scheme should logically be considerably increasec 
by this lessening of the necessity for severe application 
The less irksome and exacting the new régime, the less 
chance of a reversion to the earlier system. : 


The Theory of Socialism 401 


Under such a social order, where common labor would 
no longer be a mark of peculiar economic necessity and 
consequent low economic rank on part of the laborer, it is 
even conceivable that labor might practically come to as- 
sume that character of nobility in the eyes of society at 
large, which it now sometimes assumes in the speculations 
the well-to-do, in their complacent moods. Much has 
sometimes been made of this possibility by socialist specu- 
lators, but the inference has something of a utopian look, 
and no one, certainly, is entitled to build institutions for 
_ the coming social order on this dubious ground. 

_ What there seems to be ground for claiming is that a 
society which has reached our present degree of industrial 
; efficiency would not go into the Socialist or Nationalist 
State with as many chances of failure as a community 
whose industrial development is still at the stage at which 
strenuous labor on the part of nearly all members is 
barely sufficient to make both ends meet. 

_ In Mr. Spencer’s essay, in conformity with the line of 
2 gument of his “ Principles of Sociology,” it is pointed 
. out that, as the result of constantly operative social forces, 
all social systems, as regards the form of organisation, 
all into the one or the other of Sir Henry Maine’s two 
Classes — the system of status or the system of contract 
In accordance with this generalisation it is concluded shat 
Whenever the modern system of contract or free competi- 
tion shall be displaced, it will necessarily be replaced by 
the only other known system — that of status; the type of 
is the military organisation, or, also, a hierarchy, 
a bureaucracy. It is something after the fashion of 
e industrial organisation of ancient Peru that Mr. Spen- 
e r pictures as the inevitable sequel of the demise of the 


{ 
\ 


402 The Theory of Socialism 


be replaced only by compulsory cooperation, which is 
identified with the system of status and defined as the 
subjection of man to his fellow-man. 

Now, at least as a matter of speculation, this is not the 
only alternative. These two systems, of status, or pre- 
scription, and of contract, or competition, have divided the 
field of social organisation between them in some propor- 
tion or other in the past. Mr. Spencer has shown that, 
very generally, where human progress in its advanced 
stages has worked towards the amelioration of the lot of 
the average member of society, the movement has been 
away from the system of status and towards the system of 
contract. But there is at least one, if not more than one 
exception to the rule, as concerns the recent past. The 
latest development of the industrial organisation among’ 
civilised nations — perhaps in an especial degree in the 
case of the American people —has not been entirely a 
continuation of the approach to a régime of free contract. 
It is also, to say the least, very doubtful if the movement 
has been towards a régime of status, in the sense in which 
Sir Henry Maine uses the term. This is especially evi- 
dent in the case of the great industries which we call 
“natural monopolies”; and it is to be added that the 
present tendency is for a continually increasing propor- 
tion of the industrial activities of the community to fall 
into the category of “ natural monopolies.” No revolu- 
tion has been achieved; the system of competition 
not been discarded, but the course of industrial develop- 
ment is not in the direction of an extension of that system 
at all points; nor does the principle of status alwa 
replace that of competition wherever the latter fails. 

The classification of methods of social organisation 
under the two heads of status or of contract, is not logi- 
cally exhaustive. There is nothing in the meaning of th 


5. 


< 


The Theory of Socialism 403 


terms employed which will compel us to say that when- 
ever man escapes from the control of his fellow man, 
under a system of status, he thereby falls into a system 


of free contract. There is a conceivable escape from 


/ 


~ 


the dilemma, and it is this conceivable, though perhaps 
‘impracticable, escape from both these systems that the 
socialist agitator wishes to effect. An acquaintance with 
the aims and position of the more advanced and consistent 
advocates of a new departure leaves no doubt but that 
the principles of contract and of status, both, are in sub- 
stance familiar-to their thoughts — though often in a 
vague and inadequate form—and that they distinctly 
‘repudiate both. This is perhaps less true of those who 
take the socialist position mainly on ethical grounds. 

As bearing on this point it may be remarked that while 
the industrial system, in the case of all communities with 
whose history we are acquainted, has always in the past 
been organised according to a scheme of status or of 
contract, or of the two combined in some proportion, yet 
the social organisation has not in all cases developed along 
the same lines, so far as concerns such social functions as 
are not primarily industrial. Especially is this true of the 
later stages in the development of those communities 
whose institutions we are accustomed to contemplate with 
the most complacency, e.g., the case of the English- 
speaking peoples. The whole system of modern consti- 
tutional government in its latest developed forms, in the- 
‘ory at least, and, in a measure, in practice, does not fall 
under the head of either contract or status. It is the 
analogy of modern constitutional government through an 
impersonal law and impersonal institutions, that comes 
nearest doing justice to the vague notions of our socialist 


| propagandists. It is true, some of the most noted among 


‘them are fond of the analogy of the military organisation, 


404 The Theory of Socialism 


as a striking illustration of one feature of the system they 
advocate, but that must after all be taken as an obiter 
dictum. ; 

Further, as to the manner of the evolution of existing 
institutions and their relation to the two systems spoken 
of. So far as concerns the communities which have fig- 
ured largely in the civilised world, the political organisa- 
tion has had its origin in a military system of government. 
So, also, has the industrial organisation. But while the 
development of industry, during its gradual escape from 
the military system of status, has been, at least until lately, 
in the direction of a system of free contract, the develop- 
ment of the political organisation, so far as it has escaped 
from the régime of status, has not been in that direction. 
The system of status is a system of subjection to personal 
authority of prescription and class distinctions, and 
privileges and immunities; the system of constitutional 
government, especially as seen at its best among a people 
of democratic traditions and habits of mind, is a system of 
subjection to the will of the social organism, as expressed 
in an impersonal law. This difference between the sys- 
tem of status and the “ constitutional system ” expresses 
a large part of the meaning of the boasted free institu- 
tions of the English-speaking people. Here, subjection is 
not to the person of the public functionary, but to the 
powers vested in him. This has, of course, something of 
the ring of latter-day popular rhetoric, but it is after all 
felt to be true, not only speculatively, but in some measure 
also in practice. 

The right of eminent domain and the power to tax, as 
interpreted under modern constitutional forms, indicate 
something of the direction of development of the political 
functions of society at a point where they touch the prov 
ince of the industrial sysfem. It is along the line indt 


setD 


The Theory of Socialism 405 


cated by these and kindred facts that the socialists are 
advancing ; and it is along this line that the later develop- 
ments made necessary by the exigencies of industry under 


modern conditions are also moving. The aim of the 


oe 


propagandists is to sink the industrial community in the 
political community ; or perhaps better, to identify the two 
organisations ; but always with insistence on the necessity 
of making the political organisation, in some further de- 
veloped form, the ruling and only one in the outcome. 
Distinctly, the system of contract is to be done away 
with ; and equally distinctly, no system of status is to take 
its place. 

All this is pretty vague, and of a negative character, but 
it would quickly pass the limits of legitimate inference 
from the accepted doctrines of the socialists if it should 
attempt to be anything more. It does not have much 
to say as to the practicability of any socialist scheme. As 
a matter of speculation, there seems to be an escape from 
the dilemma insisted on by Mr. Spencer. We may con- 
ceivably have nationalism without status and without con- 
tract. In theory, both principles are entirely obnoxious 
to that system. The practical question, as to whether 
modern society affords the materials out of which an 
industrial structure can be erected on a system different 
from either of these, is a problem of constructive social 
engineering which calls for a consideration of details far 
too comprehensive to be entered on here. Still, in view 
of the past course of development of character and insti- 
tutions on the part of the people to which we belong, it is 
perhaps not extravagant to claim that no form of organi- 
‘sation which should necessarily eventuate in a thorough- 
going system of status could endure among us. The in- 


ference from this proposition may be, either that a near 


approach to nationalisation of industry would involve a 


406 The Theory of Socialism 


régime of status, a bureaucracy, which would be unen- 
durable, and which would therefore drive us back to the 
present system before it had been entirely abandoned; or 
that the nationalisation would be achieved with such a 
measure of success, in conformity with the requirements, 
of our type of character, as would make it preferable to 
what we had left behind. In either case the ground for 
alarm does not seem so serious as is sometimes imagined. 

A reversion to the system of free competition, after it 
had been in large part discarded, would no doubt be a 
matter of great practical difficulty, and the experiment 
which should demonstrate the necessity of such a step 
might involve great waste and suffering, and might seri- 
ously retard the advance of the race toward somethi 
better than our present condition ; but neither a permanent 
deterioration of human society, nor a huge catastrophe, 
is to be confidently counted on as the outcome of the 
movement toward nationalisation, even if it should prove 
necessary for society to retrace its steps. 

It is conceivable that the application of what may be 
called the “ constitutional method ” to the organisation of 
industry — for that is essentially what the advocates of 
Nationalisation demand— would result in a course of 
development analogous to what has taken place in the case 
of the political organisation under modern constitutional 
forms. Modern constitutional government — the system 
of modern free institutions — is by no means an unqualt 
fied success, in the sense of securing to each the rights 
and immunities which in theory are guaranteed to him. 

Our modern republics have hardly given us a foretaste 
of that political millennium whereof they proclaim the frui 
tion. The average human nature is as yet by no means 
entirely fit for self-government according to the “ consti 
tutional method.” Shortcomings are visible at ever} 


The Theory of Socialism 407 


turn. These shortcomings are grave enough to furnish 
serious arguments against the practicability of our free 
institutions. On the continent of Europe the belief seems 
to be at present in the ascendant that man must yet, for a 
long time, remain under the tutelage of absolutism before 
he shall be fit to organise himself into an autonomous 
political body. The belief is not altogether irrational. 
Just how great must be the advance of society and 
just what must be the character of the advance, pre- 
liminary to its advantageously assuming the autonomous 
— republican — form of political organisation, must be 
admitted to be an open question. Whether we, or any 
people, have yet reached the required stage of the advance 
is also questioned by many. But the partial success 
which has attended the movement in this direction, among 
the English-speaking people for example, goes very far 
towards proving that the point in the development of 
human character at which the constitutional method may 
be advantageously adopted in the political field, lies far 


_ this side the point at which human nature shall have be- 


come completely adapted for that method. That is to 


| say, it does not seem necessary, as regards the functions 


of socie\ 7 which we are accustomed to call political, to be 


_ entirely 1 ady for nationalisation before entering upon it. 


How far the analogy of this will hold when applied to the 
industrial organisation of society is difficult to say, but 
some significance the analogy must be admitted to possess. 

Certainly, the fact that constitutional government — the 
nationalisation of political functions— seems to have 
been a move in the right direction is not to be taken as 
proof of the advisability of forthwith nationalising the 
industrial functions. At the same time this fact does af- 
ford ground for the claim that a movement in this direc- 
tion may prove itself in some degree advantageous, even 


408 The Theory of Socialism 


if it takes place at a stage in the development of h 
nature at which mankind is still far from being enti 
fit for the duties which the new system shall imp 
The question, therefore, is not whether we have reache 
the perfection of character which would be necessary it 
order to a perfect working of the scheme of nationalisa 
tion of industry, but whether we have reached such 
degree of development as would make an imperfect work 
ing of the scheme possible. 


r _  . AND HIS FOLLOWERS? 


I. THe TuHeortes or Kart Marx 


d by a certain boldness of conception and a great 
gical consistency. Taken in detail, the constituent ele- 
gents of the system are neither novel nor iconoclastic, nor 
loes Marx at any point claim to have discovered previ- 
isly hidden facts or to have invented recondite formula- 
ms of facts already known; but the system as a whole 
as an air of originality and initiative such as is rarely 
et with among the sciences that deal with any phase of 
man culture. How much of this distinctive character 
ie Marxian system owes to the personal traits of its cre- 
for is mot easy to say, but what marks it off from all 
her systems of economic theory is not a matter of per- 
mal idiosyncrasy. It differs characteristically from all 
stems of theory that had preceded it, both in its prem- 

ies and in its aims. The (hostile) critics of Marx have 
Bt sufficiently appreciated the radical character of his 
eparture in both of these respects, and have, therefore, 
mmonly lost themselves in a tangled scrutiny of sup- 
psedly abstruse details ; whereas those writers who have 
en in sympathy with his teachings have too commonly 
disciples bent on exegesis and on confirming their 
llow-disciples in the faith. 


ie substance of lectures before students in Harvard Uni- 
y in April, 1906. Reprinted by permission from The Quar- 
ly Journal of Economics, Vol. XX, Aug., 1906 

‘ 409 


410 The Economics of Karl Marx: I 


Except as a whole and except in the light of its postu- 
lates and aims, the Marxian system is not only not ten- 
able, but it is not even intelligible. A discussion of 2 
given isolated feature of the system (such as the theory 
of value) from the point of view of classical economics 
(such as that offered by Bohm-Bawerk) is as futile as a 
discussion of solids in terms of two dimensions. . 

Neither as regards his postulates and preconceptions 
nor as regards the aim of his inquiry is Marx’s position an 
altogether single-minded one. In neither respect does his 
position come of a single line of antecedents. He is 
no single school of philosophy, nor are his ideals those 0! 
any single group of speculators living before his time 
For this reason he takes his place as an originator of ¢ 
school of thought as well as the leader of a movement 
looking to a practical end. 

As to the motives which drive him and the aspiration! 
which guide him, in destructive criticism and in creative 
speculation alike, he is primarily a theoretician busie 
with the analysis of economic phenomena and their or 
ganisation into a consistent and faithful system of scien 
tific knowledge; but he is, at the same time, consistenth} 
and tenaciously alert to the bearing which each step in thi 
progress of his theoretical work has upon the propagand: 
His work has, therefore, an air of bias, such as belongs t 
an advocate’s argument; but it is not, therefore, to b 
assumed, nor indeed to be credited, that his propagandist 
aims have in any substantial way deflected his inquiry ¢@ 
his speculations from the faithful pursuit of scientif 
truth. His socialistic bias may color his polemics, but’ 
his logical grasp is too neat and firm to admit of any bia 
other than that of his metaphysical preconceptions, affect 
ing his theoretical work. | 

There is no system of economic theory more logical 


f 


oe 


The Economics of Karl Marx: I AII 


than that of Marx. No member of the system, no single 


article of doctrine, is fairly to be understood, criticised, 


‘or defended except as an articulate member of the whole 


“and in the light of the preconceptions and postulates 


_ which afford the point of departure and the controlling 


norm of the whole. As regards these preconceptions and 


_ postulates, Marx draws on two distinct lines of antece- 


dents,— the Materialistic Hegelianism and the English 
system of Natural Rights. By his earlier training he is 
an adept in the Hegelian method of speculation and inocu- 
lated with the metaphysics of development underlying the 
Hegelian system. By his later training he is an expert in 
the system of Natural Rights and Natural Liberty, in- 
grained in his ideals of life and held inviolate throughout. 
He does not take a critical attitude toward the underlying 
principles of Natural Rights. Even his Hegelian precon- 


ceptions of development never carry him the length of 


questioning the fundamental principles of that system. 
He is only more ruthlessly consistent in working out their 
content than his natural-rights antagonists in the liberal- 
classical school. His polemics run against the specific 
tenets of the liberal school, but they run wholly on the 
ground afforded by the premises of that school. The 


ideals of his propaganda are natural-rights ideals, but his 


theory of the working out of these ideals in the course of 
history rests on the Hegelian metaphysics of development, 


_ and his method of speculation and construction of theory 


is given by the Hegelian dialectic. 


What first and most vividly centered interest on Marx 
and his speculations was his relation to the revolutionary 


“socialistic movement; and it is those features of his doc- 
_trines which bear immediately on the propaganda that 


still continue to hold the attention of the greater number 


412 The Economics of Karl Marx: I 


of his critics. Chief among these doctrines, in the appre- 
hension of his critics, is the theory of value, with its 
corollaries: (a) the doctrines of the exploitation of labor 
by capital; and (b) the laborer’s claim to the whole prod- 
uct of his labor. Avowedly, Marx traces his doctrine 0: 
labor-value to Ricardo, and through him to the classical 
economists.?2, The laborer’s claim to the whole product 
of labor, which is pretty constantly implied, though no 
frequently avowed by Marx, he has in all probability 
taken from English writers of the early nineteenth cen 
tury,® more particularly from William Thompson. These 
doctrines are, on their face, nothing but a development of 
the conceptions of natural rights which then pervadec 
English speculation and afforded the metaphysical ground 
of the liberal movement. The more formidable critics o 
the Marxian socialism have made much of these doctrina 
elements that further the propaganda, and have, by lay- 
ing the stress on these, diverted attention from othe 
elements that are of more vital consequence to the systen 
as a body of theory. Their exclusive interest in thi 
side of “scientific socialism” has even led them to dem 
the Marxian system all substantial originality, and mak 
it a (doubtfully legitimate) offshoot of English Liberal 
ism and natural rights.* But this is one-sided criticism 
It may hold as against certain tenets of the so-calle 
“ scientific socialism,” but it is not altogether to the poin 
as regards the Marxian system of theory. Even th 
Marxian theory of value, surplus value, and exploitation 


2Cf. Critique of Political Economy, chap. i, “Notes on the 
History of the Theory of Commodities,” pp. 56-73 (Englisl 
translation, New York, 1904). 
3 See Menger, Right to the Whole Produce of Labor, section 
iii-v and viii-ix, and Foxwell’s admirable Introduction to Meng 
4See Menger and Foxwell, as above, and Schaeffle, Quin 
sence of Socialism, and The Impossibility of Social Democracy 


The Economics of Karl Marx: I 413 


is not simply the doctrine of William Thompson, tran- 
ibed and sophisticated in a forbidding terminology, 


these heads. For many details and for much of his 
us Marx may be indebted to the Utilitarians; but, 
ter all, his system of theory, taken as a whole, lies 
within the frontiers of neo-Hegelianism, and even the de- 


that would properly belong to them on that ground. It 
is, therefore, not by an itemised scrutiny of the details of 
octrine and by tracing their pedigree in detail that a fair 

nception of Marx and his contribution to economics 


nd so overlooking the whole in the prespective which the 
lapse of time now affords us, but which he could not 
himself attain, since he was too near to his own work to 


see why he went about it as he did. 


ithin the scheme of the Materialistic Conception of 
istory.° This materialistic conception is essentially 
Hegelian,® although it belongs with the Hegelian Left, 


the direct line of Hegelian orthodoxy. . The chief point 
interest here, in identifying the materialistic concep- 


414 The Economics of Karl Marx: I 


immediately and uncompromisingly into contrast with 
Darwinism and the post-Darwinian conceptions of evolu- 
tion. Even if a plausible English pedigree should be 
worked out for this Materialistic Conception, or “ Scien- 
tific Socialism,” as has been attempted, it remains none 
the less true that the conception with which Marx went 
to his work was a transmuted framework of Hegelian 
dialectic.’ d 

Roughly, Hegelian materialism differs from Hegelian 
orthodoxy by inverting the main logical sequence, not by 
discarding the logic or resorting to new tests of truth or 
finality. One might say, though perhaps with excessive 
crudity, that, where Hegel pronounces his dictum, Das 
Denken ist das Sein, the materialists, particularly Marx 
and Engels, would say Das Sein macht das Denken. But 
in both cases some sort of a creative primacy is assigned 
to one or the other member of the complex, and in neither 
case is the relation between the two members a causa 
relation. In the materialistic conception man’s spiritual 
life — what man thinks — is a reflex of what he is in 
material respect, very much in the same fashion as the 
orthodox Hegelian would make the material world a re 
flex of the spirit. In both, the dominant norm of specula- 
tion and formulation of theory is the conception of 
movement, development, evolution, progress; and in both 
the movement is conceived necessarily to take place by 
the method of conflict or struggle. The movement is of 


toward the realisation in explicit form of all that is im- 
plicit in the substantial activity involved in the movement. 
The movement is, further, self-conditioned and self-act 
ing: it is an unfolding by inner necessity. The struggle 


7 See e.g., Seligman, The Economic Interpretation of History 
Part I. j 


The Economics of Karl Marx: I AIS 


which constitutes the method of movement or evolution is, 
in the Hegelian system proper, the struggle of the spirit 
for self-realisation by the process of the well-known 
three-phase dialectic. In the materialistic conception of 
history this dialectical movement becon#es the class strug- 
gle of the Marxian system. 

The class struggle is conceived to be “ material,” but 
the term “ material” is in this connection used in a meta- 
phorical sense. It does not mean mechanical or physical, 
or even physiological, but economic. It is material in the 
sense that it is a struggle between classes for the material 
means of life. “The materialistic conception of history 
proceeds on the principle that production and, next to pro- 
duction, the exchange of its products is the groundwork 
of every social order.”* The social order takes its form 
through the class struggle, and the character of the class 
struggle at any given phase of the unfolding development 
of society is determined by “ the prevailing mode of eco- 

“nomic production and exchange.” The dialectic of the 
movement of social progress, therefore, moves on the 
spiritual plane of human desire and passion, not on the 
(literally) material plane of mechanical and physiological 
stress, on which the developmental process of brute crea- 
tion unfolds itself. It is a sublimated materialism, subli- 
_ mated by the dominating presence of the conscious human 
spirit; but it is conditioned by the material facts of the 
_ production of the means of life.®° The ultimately active 
_ forces involved in the process of unfolding social life are 
(apparently) the material agencies engaged in the me- 


‘ 


8 Engels, Development of Socialism, beginning of section iti. 

®Cf., on this point, Max Adler, “Kausalitat und Teleologie 
im Streite um die Wissenschaft” (included in Marx-Studien, 
edited by Adler and Hilfendirg, vol. i), particularly section xi; 
¢f. also Ludwig Stein, Die soziale Frage im Lichte der Philo- 
Sophie, whom Adler criticises and claims to have refuted. 


416 The Economics of Karl Marx: I 


chanics of production; but the dialectic of the process — 
the class struggle — runs its course only among and in 
terms of the secondary (epigenetic) forces of human 
consciousness engaged in the valuation of the materia 
products of industry. A consistently materialistic con- 
ception, consistently adhering to a materialistic interpre- 
tation of the. process of development as well as of the 
facts involved in the process, could scarcely avoid maki 
its putative dialectic struggle a mere unconscious and 
irrelevant conflict of the brute material forces. This 
would have amounted to an interpretation in terms of 
opaque cause and effect, without recourse to the conce pt 
of a conscious class struggle, and it might have led to a 
concept of evolution similar to the unteleological Darwin- 
ian concept of natural selection. It could scarcely have 
led to the Marxian notion of a conscious class struggle as 
the one necessary method of social progress, though it 
might conceivably, by the aid of empirical generalisation, 
have led to a scheme of social process in which a class 
struggle would be included as an incidental though per- 
haps highly efficient factor.*° It would have led, as Da 
winism has, to a concept of a process of cumulative 
change in social structure and function; but this process 
being essentially a cumulative sequence of causation 
opaque and unteleological, could not, without an infusioi 
of pious fancy by the speculator, be asserted to involve 
progress as distinct from retrogression or to tend to a 
“realisation” or “ self-realisation” of the human spiri 
or of anything else. Neither could it conceivably be as 
serted to lead up to a final term, a goal to which all lines 
of the process should converge and beyond which the 
process would not go, such as the assumed goal of the 
Marxian process of class struggle, which is conceived te 


10 Cf, Adler, as above, 


The Economics of Karl Marx: I 417 


cease in the classless economic structure of the socialistic 
final term. In Darwinism there is no such final or 

_ perfect term, and no definitive equilibrium. 

_ The disparity between Marxism and Darwinism, as well 
as the disparity within the Marxian system between the 
range of material facts that are conceived to be the funda- 
mental forces of the process, on the one hand, and the 
range of spiritual facts within which the dialectic move- 
ment proceeds,— this disparity is shown in the character 
assigned the class struggle by Marx and Engels. The 

_ struggle is asserted to be a conscious one, and proceeds 

on a recognition by the competing classes of their mu- 

tually incompatible interests with regard to the material 
means of life. The class struggle proceeds on motives of 

_ interest, and a recognition of class interest can, of course, 

be reached only by reflection on the facts of the case. 

_ There is, therefore, not even a direct causal connection 

between the material forces in the case and the choice of 

_ a given interested line of conduct. The attitude of the 

interested party does not result from the material forces 

so immediately as to place it within the relation of direct 

_ cause and effect, nor even with such a degree of intimacy 

G as to admit of its being classed as a tropismatic, or even 

L instinctive, response to the impact of the material force 

in question. The sequence of reflection, and the conse- 

quent choice of sides to a quarrel, run entirely alongside 

_ of a range of material facts concerned. 

A further characteristic of the doctrine of class strug- 

. gle requires mention. While the concept is not Darwin- 

dan, it is also not legitimately Hegelian, whether of the 

Right or the Left. It is of a utilitarian origin and of 

| English pedigree, and it belongs to Marx by virtue of his 

having borrowed its elements from the system of self- 
gpnterest. It is in fact a piece of hedonism, and is related 


418 The Economics of Karl Marx: I 


to Bentham rather than to Hegel. It proceeds on the 
grounds of the hedonistic calculus, which is equally for- | 
eign to the Hegelian notion of an unfolding process and 
to the post-Darwinian notions of cumulative causation. 
As regards the tenability of the doctrine, apart from the 
question of its derivation and its compatibility with the 
neo-Hegelian postulates, it is to be added that it is quite 
out of harmony with the later results of psychological in- 
quiry,— just as is true of the use made of the hedonistic 
calculus by the classical (Austrian) economics. 


Within the domain covered by the materialistic concep- 
tion, that is to say within the domain of unfolding human 
culture, which is the field of Marxian speculation at large, 
Marx has more particularly devoted his efforts to an 
analysis and theoretical formulation of the present situa- 
tion,— the current phase of the process, the capitalistic 

/ system. And, since the prevailing mode of the produc- 
tion of goods determines the institutional, intellectual, and 
spiritual life of the epoch, by determining the form and 
method of the current class struggle, the discussion neces- 
sarily begins with the theory of “ capitalistic production,” 
or production as carried on under the capitalistic system.» 


11 Jt may be noted, by way of caution to readers familiar with 
the terms only as employed by the classical (English and 
Austrian) economists, that in Marxian usage “capitalistic pro- 
duction” means production of goods for the market by hired 
labor under the direction of employers who own (or control) the 

eans of production and are engaged in industry for the sake of 
Ja profit. “Capital” is wealth (primarily funds) so employed. 
In these and other related points of terminological usage Marx 
is, of course, much more closely in touch with colloquial usage 
than those economists of the classical line who make capital 
signify “the products of past industry used as aids to further 
production.” With Marx “Capitalism” implies certain relations 
of ownership, no less than the “ productive use” which is alone 
insisted on by so many later economists in defining the term. — 


a 


The Economics of Karl Marx: I 419 


Under the capitalistic system, that is to say under the 
system of modern business traffic, production is a produc- 
tion of commodities, merchantable goods, with a view to 
the price to be obtained for them in the market. The 
great fact on which all industry under this system hinges 
is the price of marketable goods. Therefore it is at this 
point that Marx strikes into the system of capitalistic pro- 


_ duction, and therefore the theory of value becomes the 


dominant feature of his economics and the point of de- 
parture for the whole analysis, in all its voluminous rami- 
fications.*” 

It is scarcely worth while to question what serves as 
the beginning of wisdom in the current criticisms of 
Marx; namely, that he offers no adequate proof of his 


_labor-value theory.** It is even safe to go farther, and 


say that he offers no proof of it. The feint which occu- 
pies the opening paragraphs of the Kapital and the corre- 
sponding passages of Zur Kritik, etc., is not to be taken 
seriously as an attempt to prove his position on this head 
by the ordinary recourse to argument. It is rather a self- 
satisfied superior’s playful mystification of those readers 
(critics) whose limited powers do not enable them to see 


12Jn the sense that the theory of value affords the point of de- 
parture and the fundamental concepts out of which the further 
theory of the workings of capitalism is constructed,—in this 
sense, and in this sense only, is the theory of value the central 
doctrine and the critical tenet of Marxism. It does not follow 
that the Marxist doctrine of an irresistible drift towards a social- 


istic consummation hangs on the defensibility of the labor-value 


theory, nor even that the general structure of the Marxist eco- 
nomics would collapse if translated into other terms than those 
of this doctrine of labor-value. Cf. Bohm-Bawerk, Karl Marx 


and the Close of his System; and, on the other hand, Franz Op- 
| penheimer, Das Grundgesetz der Marx’schen Gesellschaftslehre ; 
and Rudolf Goldscheid, Verelendungs- oder Meliorationstheorie. 


13 Cf., e.g., Bohm-Bawerk, as above; Georg Adler, Grundlagen 


1 der Karl Marsz’schen Kritik. 


420 The Economics of Karl Marx: I 


that his proposition is self-evident. Taken on the Hegel- 
ian (neo-Hegelian) ground, and seen in the light of the 
general materialistic conception, the proposition that 
value = labor-cost is self-evident, not to say tautological. 
Seen in any other light, it has no particular force. ; 

In the Hegelian scheme of things the only substantial — 
reality is the unfolding life of the spirit. In the neo-— 
Hegelian scheme, as embodied in the materialistic concep- 
tion, this reality is translated into terms of the unfolding — 
(material) life of man in society.* In so far as the 
goods are products of industry, they are the output of this _ 
unfolding life of man, a material residue embodying a 
given fraction of this forceful life-process. In this life-_ 
process lies all substantial reality, and all finally valid 
relations of quantivalence between the products of this 
life-process must run in its terms. The life-process, 
which, when it takes the specific form of an expenditure” 
of labor power, goes to produce goods, is a process of 
material forces, the spiritual or mental features of the 
life-process and of labor being only its insubstantial reflex. 
It is consequently only in the material changes wrought by 
this expenditure of labor power that the metaphysical sub- 
stance of life — labor power — can be embodied; but in 
these changes of material fact it cannot but be embodied, 
since these are the end to which it is directed. 

This balance between goods in respect of their magni- 
tude as output of human labor holds good indefeasibly, in 


14Tn much the same way, and with an analogous effect on their 
theoretical work, in the preconceptions of the classical (including 
the Austrian) economists, the balance of pleasure and pain i 
taken to be the ultimate reality in terms of which all economic 
theory must be stated and to terms of which all phenomena 
should finally be reduced in any definitive analysis of economic 
life. It is not the present purpose to inquire whether the one 
of these uncritical assumptions is in any degree more meritorious 
or more serviceable than the other. 


The Economics of Karl Marx: I 421 


, ‘point of the metaphysical reality of the life-process, what- 
ever superficial (phenomenal) variations from this norm 
"may occur in men’s dealings with the goods under the 
stress of the strategy of self-interest. Such is the value 
of the goods in reality; they are equivalents of one an- 
_ other in the proportion in which they partake of this sub- 
_ stantial quality, although their true ratio of equivalence 
_ May never come to an adequate expression in the transac- 
' tions involved in the distribution of the goods. This real 
_ or true value of the goods is a fact of production, and 
_ holds true under all systems and methods of production, 
whereas the exchange value (the “ phenomenal form” of 
the real value) is a fact of distribution, and expresses the 
_ teal value more or less adequately according as the scheme 
_ of distribution in force at the given time conforms more 
_or less closely to the equities given by production. If the 
output of industry were distributed to the productive 
agents strictly in proportion to their shares in produc- 
_ tion, the exchange value of the goods would be presumed 
_ to conform to their real value. But, under the current, 
capitalistic system, distribution is not in-any sensible de- 
_ gree based on the equities of production, and the exchange 
value of goods under this system can therefore express 
_ their real value only with a very rough, and in the main 
fortuitous, approximation. Under a socialistic régime, 
_ where the laborer would get the full product of his labor, 
or where the whole system of ownership, and conse- 
a quently the system of distribution, would lapse, values 
would reach a true expression, if any. 
Under the capitalistic system the determination of ex- 
change value is a matter of competitive profit-making, 
_ and exchange values therefore depart erratically and in- 
 continently from the proportions that would legitimately 
be given them by the real values whose only expression 


422 The Economics of Karl Marx: I 


they are. Marx’s critics commonly identify the concept 
of “value” with that of “exchange value,”** and show 
that the theory of “value” does not square with the run 
of the facts of price under the existing system of dist 
bution, piously hoping thereby to have refuted the Marx- 
ian doctrine; whereas, of course, they have for the most 
part not touched it. The misapprehension of the criti 
may be due to a (possibly intentional) oracular obscurity 
on the part of Marx. Whether by his fault or their o 
their refutations have hitherto been quite inconclusive. 
Marx’s severest stricture on the iniquities of the capital- 
istic system is that contained by implication in his develop- 
ment of the manner in which actual exchange value of 
goods systematically diverges from their real (labor-cost) 
value. Herein, indeed, lies not only the inherent iniquity 
of the existing system, but also its fateful infirmity, ac- 
cording to Marx. ; 

The theory of value, then, is contained in the main pos- 
tulates of the Marxian system rather than derived from 
them. Marx identifies this doctrine, in its elements, with 
the labor-value theory of Ricardo,’® but the relationship 
between the two is that of a superficial coincidence in 
their main propositions rather than a substantial identity 
of theoretic contents. In Ricardo’s theory the source and 
measure of value is sought in the effort and sacrifice 
undergone by the producer, consistently, on the whole, 


15 Bohm-Bawerk, Capital and Interest, Book VI, chap. iii; also 
Karl Marx and the Close of his System, particularly chap. iv; 
Adler, Grundlagen, chaps. ii. and iii. 

16 Cf, Kapital, vol. i, chap. xv, p. 486 (4th ed.). See also notes 
g and 16 to chap. i of the same volume, where Marx discusses 
the labor-value doctrines of Adam Smith and an earlier (anony- 
mous) English writer, and compares them with his own. Sim- 
ilar comparisons with the early — classical — value theories recut 
from time to time in the later portions of Kapital. 


The Economics of Karl Marx: I 423 


_ with the Benthamite-utilitarian position to which Ricardo 
~ somewhat loosely and uncritically adhered. The decisive 
_ fact about labor, that quality by virtue of which it is as- 
_ sumed to be the final term in the theory of production, is 
its irksomeness. Such is of course not the case in the 
" labor-value theory of Marx, to whom the question of the 
irksomeness of labor is quite irrelevant, so far as regards 
the relation between labor and production. The substan- 
tial diversity or incompatibility of the two theories shows 
itself directly when each is employed by its creator in the 
further analysis of economic phenomena. Since with 
Ricardo the crucial point is the degree of irksomeness of 
labor, which serves as a measure both of the labor ex- 
pended and the value produced, and since in Ricardo’s 
‘utilitarian philosophy there is no more vital fact under- 
lying this irksomeness, therefore no surplus-value theory 
follows from the main position. The productiveness of 
- labor is not cumulative, in its own working; and the Ri- 
 cardian economics goes on to seek the cumulative pro- 
ductiveness of industry in the functioning of the products 
of labor when employed in further production and in the 
irksomeness of the capitalist’s abstinence. From which 
| duly follows the general position of classical economics on 
the theory of production. 
| With Marx, on the other hand, the labor power ex- 
pended in production being itself a product and having a 
substantial value corresponding to its own labor-cost, the 
value of the labor power expended and the value of the 
\ product created by its expenditure need not be the same. 
They are not the same, by supposition, as they would be 
‘in any hedonistic interpretation of the facts. Hence a 
‘discrepancy arises between the value of the labor power 
expended in production and the value of the product cre- 
ated, and this discrepancy is covered by the concept of 
< 


t 


: 
. 
| 


on 
Li 
* 


424 The Economics of Karl Marx: I 


surplus value. Under the capitalistic system, wage 
being the value (price) of. the labor power consumed it 
industry, it follows that the surplus product of their labor 
cannot go to the laborers, but becomes the profits of 
capital and the source of its accumulation and increase 
From the fact that wages are measured by the value o 
labor power rather than by the (greater) value of the 
product of labor, it follows also that the laborers ar 
unable to buy the whole product of their labor, and s 
that the capitalists are unable to sell the whole produc 
of industry continuously at its full value, whence aris 
difficulties of the gravest nature in the capitalistic system 
in the way of overproduction and the like. 

But the gravest outcome of this systematic discrepancy 
between the value of labor power and the value of ii 
product is the accumulation of capital out of unpaid labor 
and the effect of this accumulation on the laboring popu 
lation. The law of accumulation, with its corollary, th 
doctrine of the industrial reserve army, is the final tern 
and the objective point of Marx’s theory of capitalist pre 
duction, just as the theory of labor value is his point 0 
departure.17 While the theory of value and surplus valu 
are Marx’s explanation of the possibility of existence 0 
the capitalistic system, the law of the accumulation o 
capital is his exposition of the causes which must lead t 
the collapse of that system and of the manner in whic 
the collapse will come. And since Marx is, always an 


17 Oppenheimer (Das Grundgesetz der Marx’schen Gese 
schaftslehre) is right in making the theory of accumulation tk 
central element in the doctrines of Marxist socialism, but it do 
not follow, as Oppenheimer contends, that this doctrine is tk 
keystone of Marx’s economic theories. It follows logically frot 
the theory of surplus value, as indicated above, and rests on th 
theory in such a way that it would fail (in the form in whic 
it is held by Marx) with the failure of the doctrine of surpli 
value. : 


The Economics of Karl Marx: I 425 


everywhere, a socialist agitator as well as a theoretical 
economist, it may be said without hesitation that the law 
of accumulation is the climax of his great work, from 
whatever point of view it is looked at, whether as an eco- 
‘nomic theorem or as a tenet of socialistic doctrine. 


The law of capitalistic accumulation may be para- 


phrased as follows:** Wages being the (approximately 
exact) value of the labor power bought in the wage con- 


tract; the price of the product being the (similarly ap- 
proximate) value of the goods produced; and since the 


value of the product exceeds that of the labor power by 
‘a given amount (surplus value), which by force of the 
wage contract passes into the possession of the capitalist 


and is by him in part laid by as savings and added to the 


‘capital already in hand, it follows (a) that, other things 


equal, the larger the surplus value, the more rapid the 
increase of capital; and, also (b), that the greater the 
increase of capital relatively to the labor force employed, 
‘the more productive the labor employed and the larger 


the surplus product available for accumulation. The 


process of accumulation, therefore, is evidently a cumu- 
lative one; and, also evidently, the increase added to 


_ capital is an unearned increment drawn from the unpaid 
| surplus product of labor. 


But with an appreciable increase of the aggregate capi- 
tal a change takes place in its technological composition, 
whereby the “constant” capital (equipment and raw 
Materials) increases disproportionately as compared with 


| the “variable” capital (wages fund). “ Labor-saving 


“devices” are used to a greater extent than before, and 
labor is saved. A larger proportion of the expenses of 
production goes for the purchase of equipment and raw 
‘materials, and a smaller proportion — though perhaps an 


18 See Kapital, vol. i, chap. xxiii. 


426 The Economics of Karl Marx: I 


absolutely increased amount — goes for the purchase ¢ 
labor power. Less labor is needed relatively to the ag; 
gate capital employed as well as relatively to the quantit 
of goods produced. Hence some portion of the increas 
ing labor supply will not be’ wanted, and an “ industri: 
reserve army,” a “ surplus labor population,” an army ¢ 
unemployed, comes into existence. This reserve groy 
relatively larger as the accumulation of capital proceec 
and as technological improvements consequently 
ground; so that there result two divergent cumulati 
changes in the situation,— antagonistic, but due to th 
same set of forces and, therefore, inseparable: capi 
increases, and the number of unemployed laborers (rel 
tively) increases also. 

This divergence between the amount of capital and ou 
put, on the one hand, and the amount received by labore 
as wages, on the other hand, has an incidental consequen 
of some importance. The purchasing power of the | 
borers, represented by their wages, being the largest pz 
of the demand for consumable goods, and being at f 
same time, in the nature of the case, progressively le 
adequate for the purchase of the product, represented | 
the price of the goods produced, it follows that the ma 
ket is progressively more subject to glut from ov 
duction, and hence to commercial crises and depre 
It has been argued, as if it were a direct inference ir 
Marx’s position, that this maladjustment between p 
duction and markets, due to the laborer not getting t 
full product of his labor, leads directly to the breakdo 
of the capitalistic system, and so by its own force 1 
bring on the socialistic consummation. Such is ft 


The Economics of Karl Marx: I 427 


is to lead up to socialism. In Marx’s theory, socialism is 
to come by way of a conscious class movement on the part 
of the propertyless laborers, who will act advisedly on 
their own interest and force the revolutionary movement 
for their own gain. But crises and depression will have 
a large share in bringing the laborers to a frame of mind 
suitable for such a move. 

Given a growing aggregate capital, as indicated above, 
and a concomitant reserve of unemployed laborers grow- 
ing at a still higher rate, as is involved in Marx’s position, 
this body of unemployed labor can be, and will be, used 
by the capitalists to depress wages, in order to increase 
profits. Logically, it follows that, the farther and faster 
capital accumulates, the larger will be the reserve of un- 
employed, both absolutely and relatively to the work to 
be done, and the more severe will be the pressure acting to 
reduce wages and lower the standard of living, and the 
‘deeper will be the degradation and misery of the working 

class and the more precipitately will their condition de- 
cline to a still lower depth. Every ‘period of depression, 
| with its increased body of unemployed labor seeking 
| work, will act to hasten and accentuate the depression of 
| wages, until there is no warrant even for holding that 
| wages will, on an average, be kept up to the subsistence 
minimum.’® Marx, indeed, is explicit to the effect that 
such will be the case,— that wages will decline below the 
| subsistence minimum ; and he cites English conditions of 
child labor, misery, and degeneration to substantiate his 
Views.2? When this has gone far enough, when capital- 


19 The “subsistence minimum” is here taken in the sense used 
by Marx and the classical economists, as meaning what is neces- 
Sary to keep up the supply of labor at its current rate of efficiency. 
' ?°See Kapital, vol. i, chap, xxiii, sections 4 and 5. 


428 The Economics of Karl Marx: I 


ist production comes near enough to occupying the whole 


the community with nothing to lose, then, having ala 
advice together, they will move, by legal or extra-leg 
means, by absorbing the state or by subverting it, to estab 
lish the social revolution. : 

Socialism is to come through class antagonism due t 
the absence of all property interests from the laboring 
class, coupled with a generally prevalent misery so pro 
found as to involve some degree of physical degeneration 
This misery is to be brought about by the heightened p ¢ 
ductivity of labor due to an increased accumulation of 
capital and large improvements in the industrial arts 
which in turn is caused by the fact that under a systen 
of private enterprise with hired labor the laborer does no 
get the whole product of his labor; which, again, is onl 
saying in other words that private ownership of capité 
goods enables the capitalist to appropriate and accumulate 
the surplus product of labor. As to what the régime j 
to be which the social revolution will bring in, Marx has 
nothing particular to say, beyond the general thesis tha 
there will be no private ownership, at least not of th 
means of production. 


Such are the outlines of the Marxian system of socia 
ism. In all that has been said so far no recourse is hi 
to the second and third volumes of Kapital. Nor is 
necessary to resort to these two volumes for the genet 
theory of socialism. They add nothing essential, a 


the working out of the capitalist scheme are treated 
greater fullness, and the analysis is carried out with great 
consistency and with admirable results. For economice 


The Economics of Karl Marx: I 429 


theory at large these further two volumes are important 
‘enough, but an inquiry into their contents in that connec- 


' tion is not called for here. 


Nothing much need be said as to the tenability of this 
theory. In its essentials, or at least in its characteristic 
elements, it has for the most part been given up by latter- 
day socialist writers. The number of those who hold to 
it without essential deviation is growing gradually smaller. 
Such is necessarily the case, and for more than one rea- 
son. The facts are not bearing it out on. certain critical 
points, such as the doctrine of increasing misery; and the 
Hegelian philosophical postulates, without which the 
Marxism of Marx is groundless, are for the most part 
forgotten by the dogmatists of to-day. Darwinism has 
largely supplanted Hegelianism in their habits of thought. 

The particular point at which the theory is most fragile, 
considered simply as a theory of social growth, is its im- 
plied doctrine of population,— implied in the doctrine of 
a growing reserve of unemployed workmen. The doc- 
trine of the reserve of unemployed labor involves as a 
postulate that population will increase anyway, without 
reference to current or prospective means of life. The 
‘empirical facts give at least a very persuasive apparent 
support to the view expressed by Marx, that misery is, or 
has hitherto been, no hindrance to the propagation of the 
race; but they afford no conclusive evidence in support of 
a thesis to the effect that the number of laborers must 
increase independently of an increase of the means of life. 
No one since Darwin would have the hardihood to say 
that the increase of the human species is not conditioned 
by the means of living. 

But all that does not really touch Marx’s position. To 
Marx, the neo-Hegelian, history, including the economic 
development, is the life-history of the human species; 


430 The Economics of Karl Marx: I 


and the main fact in this life-history, particularly in the 
economic aspect of it, is the growing volume of human 


ig 


life. This, in a manner of speaking, is the base-line of 


ing the phase of capitalist production with the rest. 
growth of population is the first principle, the most sub- 
stantial, most material factor in this process of economi 
life, so long as it is a process of growth, of unfolding, of 
exfoliation, and not a phase of decrepitude and decay 
Had Marx found that his analysis led him to a view 
adverse to this position, he would logically have held tha 
the capitalist system is the mortal agony of the race an 
the manner of its taking off. Such a conclusion is pre 
cluded by his Hegelian point of departure, according te 
which the goal of the life-history of the race in a large 
way controls the course of that life-history in all its 
phases, including the phase of capitalism. This goal o 
end, which controls the process of human development, i 
the complete realisation of life in all its fullness, and the 
realisation is to be reached by a process analogous to the 
three-phase dialectic, of thesis, antithesis, and synthesis 
into which scheme the capitalist system, with its over 
flowing measure of misery and degradation, fits as the las 
and most dreadful phase of antithesis. Marx, as a 
Hegelian,— that is to say, a romantic philosopher,— is 
necessarily an optimist, and the evil (antithetical element) 
in life is to him a logically necessary evil, as the antithesis 
is a necessary phase of the dialectic; and it is a means te 
the consummation, as the antithesis is a means to the 
synthesis. q 


a 


THE SOCIALIST ECONOMICS OF KARL MARX 


AND HIS FOLLOWERS? 


Il. THe Later Marxism 


Marx worked out his system of theory in the main during 
the third quarter of the nineteenth century. He came to 


the work from the standpoint given him by his early 


training in German thought, such as the most advanced 
and aggressive German thinking was through the middle 
period of the century, and he added to this German 


standpoint the further premises given him by an excep- 


tionally close contact with and alert observation of the 
English situation. The result is that he brings to his 
theoretical work a twofold line of premises, or rather of 
preconceptions. By early training he is a neo-Hegelian, 
and from this German source he derives his peculiar for- 
mulation of the Materialistic Theory of History. By 
later experience he acquired the point of view of that 
Liberal-Utilitarian school which dominated English 
thought through the greater part of his active life. To 
this experience he owes (probably) the somewhat pro- 
‘nounced individualistic preconceptions on which the doc- 
_trines of the Full Product of Labor and the Exploitation 
of Labor are based. These two not altogether compatible 
lines of doctrine found their way together into the tenets 
_0f scientific ? socialism, and gives its characteristic Marx- 
ian features to the body of socialist economics. 


1 Reprinted by permission from The Quarterly Journal of Eco- 

‘nomics, Vol. XXI, Feb., 1907. 

2“ Scientific” is here used in the half-technical sense which by 
431 


432 The Economics of Karl Marx: II 


The socialism that inspires hopes and fears to-day is of 
the school of Marx. No one is seriously apprehensive of 
any other so-called socialistic movement, and no one i 
seriously concerned to criticise or refute the doctrines set 
forth by any other school of “ socialists.” It may be 


body of Marxist doctrine. Those who make up the body 
of the movement may not always be familiar with the 
details — perhaps not even with the general features — of 
the Marxian scheme of economics; but with such consist- 


retical position of the avowed Marxism. In proportion 
as the movement in any given community grows in mass, 


a more consistently Marxian complexion. It is not the 
Marxism of Marx, but the materialism of Darwin, which 
the socialists of to-day have adopted. The Marxist so- 
cialists of Germany have the lead, and the socialists of 
other countries largely take their cue from the German 
leaders. 


socialism are avowed Marxists. Exceptions to that rule 
are very few. On the whole, the substantial truth of the 
Marxist doctrines is not seriously questioned within the 
lines of the socialists, though there may be some appreci- 


on one point and another. Much and eager controversy 
circles about questions of that class. 

The keepers of the socialist doctrines are passably 
agreed as to the main position and the general principles 


usage it often has in this connection, designating the theories 0 
Marx and his followers. 


The Economics of Karl Marx: II 433 


Indeed, so secure is this current agreement on the general 
‘principles that a very lively controversy on matters of 
detail may go on without risk of disturbing the general 
position. This general position is avowedly Marxism. 
But it is not precisely the position held by Karl Marx. 
It has been modernised, adapted, filled out, in response to 
exigencies of a later date than those which conditioned 
the original formulation of the theories. It is, of course, 
not admitted by the followers of Marx that any substan- 
tial change or departure from the original position has 
taken place. They are somewhat jealously orthodox, and 
are impatient of any suggested “improvements” on the 
Marxist position, as witness the heat engendered in the 
“ revisionist ’’ controversy of a few years back. But the 
jealous protests of the followers of Marx do not alter the 
fact that Marxism has undergone some substantial change 
since it left the hands of its creator. Now and then a 
_ more or less consistent disciple of Marx will avow a need 
| of adapting the received doctrines to circumstances that 
have arisen later than the formulation of the doctrines; 
and amendments, qualifications, and extensions, with this 
need in view, have been offered from time to time. But 
more pervasive though unavowed changes have come in 
the teachings of Marxism by way of interpretation and an 
“unintended shifting of the point of view. Virtually, the 
whole of the younger generation of socialist writers shows 
sucha growth. A citation of personal instances would be 
quite futile. 


It is the testimony of his friends as well as of his 
writings that the theoretical position of Marx, both as 
regards his standpoint and as regards his main tenets, fell 
into a definitive shape relatively early, and that his later 
work was substantially a working out of what was con- 


434 The Economics of Karl Marx: II 


tained in the position taken at the outset of his career.’ 
By the latter half of the forties, if not by the middle of 
the forties, Marx and Engels had found the outlook on 
human life which came to serve as the point of departure 
and the guide for their subsequent development of theory 
Such is the view of the matter expressed by Engels during 
the later years of his life. The position taken by thi 
two great leaders, and held by them substantially intact 
was a variant of neo-Hegelianism, as has been indicated 
in an earlier section of this paper.® But neo-Hegelianism 


was short-lived, particularly considered as a standpoin 
for scientific theory. The whole romantic school of 
thought, comprising neo-Hegelianism with the rest, began 
to go to pieces very soon after it had reached an approach 


tional speed, so that the close of the third quarter of the 
century saw the virtual end of it as a vital factor in th 


3 There is, indeed, a remarkable consistency, amounting sub- 
stantially to an invariability of position, in Marx’s writing, from 
the Communist Manifesto to the last volume of the Capital 
The only portion of the great M anifesto which became antiquated 
in the apprehension of its creators, is the polemics addressed te 
the “ Philosophical” socialists of the forties and the illustrativ 
material taken from contemporary politics. The main positiot 
and the more important articles of theory — the materialistic con- 
ception, the doctrine of class struggle, the theory of value an 
surplus value, of increasing distress, of the reserve army, of th 
capitalistic collapse — are to be found in the Critique of Politica 
Economy (1859), and much of them in the Misery of Philosophy 
(1847), together with the masterful method of analysis and con- 
struction which he employed throughout his theoretical work. - 

4Cf. Engels, Feuerbach (English translation, Chicago, 1903) 
especially Part IV, and various papers published in the New 
Zeit; also the preface to the Communist Manifesto written i 
1888 ; also the preface to volume ii. of Capital, where Engel 
argues the question of Marx’s priority in connection with th 
leading theoretical principles of his system. 

5 Cf. Feuerbach, as above; The Development of Socialism fro 
Utopia to Science, especially sections ii and iii. 


a A 


The Economics of Karl Marx: II 435 


= = 


development of human knowledge. In the realm of 
theory, primarily of course in the material sciences, the 
“new era belongs not to romantic philosophy, but to the 
evolutionists of the school of Darwin. Some few great 
figures, of course, stood over from the earlier days, but 
it turns out in the sequel that they have served mainly to 
mark the rate and degree in which the method of scientific 
knowledge has leit them behind. Such were Virchow 
and Max Miller, and such, in economic science, were the 
great figures of the Historical School, and such, in a de- 
gree, were also Marx and Engels. The later generation 
of socialists, the spokesmen and adherents of Marxism 
during the closing quarter of the century, belong to the 
“flew generation, and see the phenomena of human life 
under the new light. The materialistic conception in 
their handling of it takes on the color of the time in which 
they lived, even while they retain the phraseology of the 
_ generation that went before them.® 
_ The difference between the romantic school of thought, 
to which Marx belonged, and the school of the evolution- 


_ §&Such a socialist as Anton Menger, e.g., comes into the neo- 
Marxian school from without, from the field of modern scientific 
inquiry, and shows, at least virtually, no Hegelian color, whether 
in the scope of his inquiry, in his method, or in the theoretical 

| work which he puts forth. It should be added that his Neue 
Staatslehre, and Neue Sitienlehre are the first socialistic con- 
structive work of substantial value as a contribution to knowl- 
edge, outside of economic theory proper, that has appeared since 
Lassalle. The efforts of Engels (Ursprung der Familie) and 
Bebel (Die Frau) would scarcely be taken seriously as scientific 

“monographs even by hot-headed socialists if it were not for the 
ack of anything better. Menger’s work is not Marxism, whereas 
‘Engels’s and Bebel’s work of this class is practically without 
value or originality. The unfitness of the Marxian postulates and 
methods for the purposes of modern science shows itself in the 
Sweeping barrenness of socialistic literature all along that line 
of inquiry into the evolution of institutions for the promotion of 
which the materialistic dialectic was invented. 


Boe 


436 The Economics of Karl Marx: II 


ists into whose hands the system has fallen,— or perhaps, 
better, is falling,— is great and pervading, though it may 
not show a staring superficial difference at any one point, 
—at least not yet. The discrepancy between the two is 
likely to appear more palpable and more sweeping when 
the new method of knowledge has been applied with fuller 
realisation of its reach and its requirement in that domain 
of knowledge that once belonged to the neo-Hegelian 
Marxism. The supplanting of the one by the other has 


avowedly, by a sort of precession of the point of view 
from which men size up the facts and reduce them t 
intelligible order. 

The neo-Hegelian, romantic, Marxian standpoint was 
wholly personal, whereas the evolutionistic — it may be 
called Darwinian — standpoint is wholly impersonal, 
The continuity sought in the facts of observation and 
imputed to them by the earlier school of theory was a 
continuity of a personal kind,— a continuity of reason and 
consequently of logic. The facts were construed to take 
such a course as could be established by an appeal to rea- 
son between intelligent and fair-minded men. They were 
supposed to fall into a sequence of logical consistency. 
The romantic (Marxian) sequence of theory is essentially 
an intellectual sequence, and it is therefore of a teleologi 
cal character. The logical trend of it can be argued out 
That is to say, it tends to a goal. On the other hand, im 
the Darwinian scheme of thought, the continuity sought it 
and imputed to the facts is a continuity of cause and 
effect. It is a scheme of blindly cumulative causation : 
in which there is no trend, no final term, no consumma 
tion. The sequence is controlled by nothing but the 
a tergo of brute causation, and is essentially mechanical 
The neo-Hegelian (Marxian) scheme of development i 


: 
: 
: 


The Economics: of Karl Marx: II 437 


drawn in the image of the struggling ambitious human 
spirit: that of Darwinian evolution is of the nature of a 
mechanical process.” 

What difference, now, does it make if the materialistic 
conception is translated from the romantic concepts of 


| Marx into the mechanical concepts of Darwinism? It 


distorts every feature of the system in some degree, and 
throws a shadow of doubt on every conclusion that once 
seemed secure. The first principle of the Marxian 
scheme is the concept covered by the term “ Materialistic,” 
to the effect that the exigencies of the material means of 
life control the conduct of men in society throughout, and 
thereby indefeasibly guide the growth of institutions and 
shape every shifting trait of human culture. This control 
of the life of society by the material exigencies takes 
effect through men’s taking thought of material (eco- 
nomic) advantages and disadvantages, and choosing that 
which will yield the fuller material measure of life. 
When the materialistic conception passes under the Dar- 


7 This contrast holds between the original Marxism of Marx 
and the scope and method of modern science; but it does not, 
therefore, hold between the latter-day Marxists — who are largely 
imbued with post-Darwinian concepts—and the non-Marxian 
scientists. Even Engels, in his latter-day formulation of Marx- 
ism, is strongly affected with the notions of post-Darwinian 
science, and reads Darwinism into Hegel and Marx with a good 
deal of naiveté. (See his Feuerbach, especially pp. 93-08 of the 
English translation.) So, also, the serious but scarcely quite 
consistent qualifications of the materialistic conception offered by 
Engels in the letters printed in the Sozialistische Akademiker, 
1895. 
8 The fact that the theoretical structures of Marx collapse when 
their elements are converted into the terms of modern science 
should of itself be sufficient proof that those structures were 
not built by their maker out of such elements as modern science 
habitually makes use of. Marx was neither ignorant, imbecile, 
nor disingenuous, and his work must be construed from such a 
point of view and in terms of such elements as will enable his 


results to stand substantially sound and convincing. 


438 The Economics of Karl Marx: II 


winian norm, of cumulative causation, it happens, firs' 
that this initial principle itself is reduced to the rank o 
a habit of thought induced in the speculator who depend 
on its light, by the circumstances of his life, in the way o 
hereditary bent, occupation, tradition, education, climate 
food supply, and the like. But under the Darwinia 
norm the question of whether and how far material exi 
gencies control human conduct and cultural growth b 
comes a question of the share which these material exigen 
cies have in shaping men’s habits of thought, 7.e., thei 
ideals and aspirations, their sense of the true, the beauti 
ful, and the good. Whether and how far these traits of 
human culture and the institutional structure built out o 
them are the outgrowth of material (economic) exige n- 
cies becomes a question of what kind and degree of effi- 
ciency belongs to the economic exigencies among the com 
plex of circumstances that conduce to the formation of 
habits. It is no longer a question of whether material 
exigencies rationally should guide men’s conduct, but 
whether, as a matter of brute causation, they do induce 
such habits of thought in men as the economic interpre 
tation presumes, and whether in the last analysis economic 
exigencies alone are, directly or indirectly, effective in 
shaping human habits of thought. 

Tentatively and by way of approximation some such 
formulation as that outlined in the last paragraph is ap 
parently what Bérnstein and-others of the “ revisionists ” 
have been seeking in certain of their speculations,’ and, 


® Cf. Voraussetzungen des Sozialismus, especially the first two 
(critical) chapters. Bernstein’s reverent attitude toward Marx 
and Engels, as well as his somewhat old-fashioned conception of 
the scope and method of science, gives his discussion an ai 
of much greater consonance with the orthodox Marxism than 
it really has. In his later expressions this consonance ané 
conciliatory animus show up more strongly rather than other- 


7 The Economics of Karl Marx: II 439 


“sitting austere and sufficient on a dry shoal up stream, 
Kautsky has uncomprehendingly been addressing them 
advice and admonition which they do not understand.*° 
The more intelligent and enterprising among the idealist 
wing — where intellectual enterprise is not a particularly 
obvious trait— have been struggling to speak for the 
‘view that the forces of the environment may effectually 
“reach men’s spiritual life through other avenues than the 


“wise. (See Socialism and Science, including the special preface 
_ written for the French edition.) That which was to Marx 
and Engels the point of departure and the guiding norm —the 

egelian dialectic —is to Bernstein a mistake from which scien- 
“tific socialism must free itself. He says, e. g., (V oraussetzungen, 
end of ch. iv.), “The great things achieved by Marx and Engels 

‘they have achieved not by the help of the Hegelian dialectic, but 

in spite of it.” 

; The number of the “revisionists” is very considerable, and 
they are plainly gaining ground as against the Marxists of the 
older line of orthodoxy. They are by no means agreed among 
themselves as to details, but they belong together by virtue of 
_ their endeavor to so construe (and amend) the Marxian system 
‘as to bring it into consonance with the current scientific point 
of view. One should rather say points of view, since the re- 
_ visionists’ endeavors are not all directed to bringing the re- 
| ‘ceived views in under a single point of view. There are two 
_ main directions of movement among the revisionists: (a) those 
_ who, like Bernstein, Conrad Schmidt, Tugan-Baranowski, Labri- 
ola, Ferri, aim to bring Marxism abreast of the standpoint of 
_ modern science, essentially Darwinists; and (b) those who aim 

to return to some footing on the level of the romantic philosophy. 

SS best type and the strongest of the latter class are the neo- 

_Kantians, embodying that spirit of revulsion to romantic norms 

of a that makes up the philosophical side of the reactionary 
ae fostered by the discipline of German imperialism. 
(See K. Vorlander, Die neukantische Bewegung im Sozialismus.) 
& Except that he is not officially inscribed in the socialist cal- 

-endar, Sombart might be cited as a particularly effective re- 

yisionist, so far as concerns the point of modernising Marxism 
and putting the modernised materialistic conception to work. 

10 Cf. the files of the Neue Zeit, particularly during the con- 
Beessy with Bernstein, and Bernstein und das Sozialdemokra- 
“Tische Programm. 


PIES Om 


440 The Economics of Karl Marx: II 


habitual ideals and aspirations independent of, and pos 
sibly alien to, that calculus.1 
So, again, as to the doctrine of the class struggle. 


material exigencies must, it is held, proceed by the methox 
of the class struggle. This class struggle is held to b 
inevitable, and is held inevitably to lead at each revolu 
tionary epoch to a more efficient adjustment of humat 
industry to human uses, because, when a large proportiot 
of the community find themselves ill served by the curren 
economic arrangements, they take thought, band together 
and enforce a readjustment more equitable and more ad- 
vantageous to them. So long as differences of economi 
advantage prevail, there will be a divergence of interests 
between those more advantageously placed and those les: 
advantageously placed. The members of society wil 
take sides as this line of cleavage indicated by their sev 
eral economic interests may decide. Class solidarity wil 
arise on the basis of this class interest, and a struggle be: 
tween the two classes so marked off against each other 
will set in,— a struggle which, in the logic of the situation 
can end only when the previously less fortunate class 


11 The “idealist” socialists are even more in evidence outside 
of Germany. They may fairly be said to be in the ascendant i 
France, and they are a very strong and free-spoken contingen 
of the socialist movement in America. They do not commonly 
speak the language either of science or of philosophy, but, so far 
as their contentions may be construed from the standpoint of 
modern science, their drift seems to be something of the kin 
indicated above. At the same time the spokesmen of this scat- 
tering and shifting group stand for a variety of opinions and 
aspirations that cannot be classified under Marxism, Darwinis 
or any other system of theory. At the margin they shade off int 
theology and the creeds. 1 


b The Economics of Karl Marx: II 441 
4 

gains the ascendancy,— and so must the class struggle 
proceed until it shall have put an end to that diversity of 
/economic interest on which the class struggle rests. All 
[this is logically consistent and convincing, but it proceeds 
on the ground of reasoned conduct, calculus of advantage, 
not on the ground of cause and effect. The class struggle 
so conceived should always and everywhere tend unre- 
mittingly toward the socialistic consummation, and should 
‘reach that consummation in the end, whatever obstruc- 
‘tions or diversions might retard the sequence of develop- 
‘ment along the way. Such is the notion of it embodied 
‘in the system of Marx. Such, however, is not the show- 
‘ing of history. Not all nations or civilisations have ad- 
vanced unremittingly toward a socialistic consummation, 
in which all divergence of economic interest has lapsed 
‘or would lapse. Those nations and civilisations which 
shave decayed and failed, as nearly all known nations and 
‘civilisations have done, illustrate the point that, however 
reasonable and logical the advance by means of the class 
‘struggle may be, it is by no means inevitable. Under the 
Darwinian norm it must be held that men’s reasoning is 
largely controlled by other than logical, intellectual 
forces; that the conclusion reached by public or class 
opinion is as much, or more, a matter of sentiment than 
of logical inference; and that the sentiment which ani- 
Mates men, singly or collectively, is as much, or more, an 
outcome of habit and native propensity as of calculated 
material interest. There is, for instance, no warrant in 
the Darwinian scheme of things for asserting a priori that 
the class interest of the working class will bring them to 
take a stand against the propertied class. It may as well 
be that their training in subservience to their employers 
will bring them again to realise the equity and excellence 
of the established system of subjection and unequal dis- 


442 The Economics of Karl Marx: II 


tribution of wealth. Again, no one, for instance, can te 
to-day what will be the outcome of the present situatio 
in Europe and America. It may be that the workin 
classes will go forward along the line of the socialist 
ideals and enforce a new deal, in which there shall be n 
economic class discrepancies, no international animosit 
no dynastic politics. But then it may also, so far as ce 
be foreseen, equally well happen that the working clas 
with the rest of the community in Germany, England, ¢ 
America, will be led by the habit of loyalty and by th 
sportsmanlike propensities to lend themselves enthusia 
tically to the game of dynastic politics, which alone the 
sportsmanlike rulers consider worth while. It is quit 
impossible on Darwinian ground to foretell whether tl 
“proletariat ” will go on to establish the socialistic rev 
lution or turn aside again, and sink their force in tf 
broad sands of patriotism. It is a question of habit ar 
native propensity and of the range of stimuli to which 
proletariat are exposed and are to be exposed, and whi 
may be the outcome is not a matter of logical consistenc¢ 
but of response to stimulus. 

So, then, since Darwinian concepts have begun to dor 
nate the thinking of the Marxists, doubts have now at 
again come to assert themselves both as to the inevitabl 
ness of the irrepressible class struggle and to its sole ef 
cacy. Anything like a violent class struggle, a seizu 
of power by force, is more and more consistently depr 
cated. For resort to force, it is felt, brings in its tra 
coercive control with all its apparatus of prerogative, 
tery, and subservience.’ 


12 Throughout the revisionist literature in Germany there is 4 
visible softening of the traits of the doctrine of the class strug 
gle, and the like shows itself in the programmes of the par 
Outside of Germany the doctrinaire insistence on this tenet 1s 


; The Economics of Karl Marx: II 443 


Re 


| So, again, the Marxian doctrine of progressive prole- 
tarian distress, the so-called Verelendungstheorie, which 
/stands pat on the romantic ground of the original Marx- 
‘ism, has fallen into abeyance, if not into disrepute, since 
‘the Darwinian conceptions have come to prevail. As a 
‘matter of reasoned procedure, on the ground of enlight- 
‘ened material interest alone, it should be a tenable posi- 
tion that increasing misery, increasing in degree and in 
volume, should be the outcome of the present system of 
‘ownership, and should at the same time result in a well- 
advised and well-consolidated working-class movement 
‘that would replace the present system by a scheme more 
advantageous to the majority. But so soon as the ques- 
tion is approached on the Darwinian ground of cause and 
effect, and is analysed in terms of habit and of response 
‘to stimulus, the doctrine that progressive misery must 
effect a socialistic revolution becomes dubious, and very 
‘shortly untenable. Experience, the experience of his- 
‘tory, teaches that abject misery carries with it deteriora- 
tion and abject subjection. The theory of progressive 
distress fits convincingly into the scheme of the Hegelian 
three-phase dialectic. It stands for the antithesis that is 
to be merged in the ulterior synthesis; but it has no par- 
ticular force on the ground of an argument from cause 
‘to effect.1$ 

It fares not much better with the Marxian theory of 
yalue and its corollaries and dependent doctrines when 


weakening even more decidedly. The opportunist politicians, 
with strong aspirations, but with relatively few and ill-defined 
eoretical preconceptions, are gaining ground. 

13 Cf. Bernstein, Die heutige Sozialdemokratie in Theorie und 
Praxis, an answer to Brunhuber, Die heutige Sozialdemokratie, 
which should be consulted in the same connection; Goldscheid, 
Verelendungs- oder Meliorationstheorie; also Sombart, Sozial- 
asmus und soziale Bewegung, 5th edition, pp. 86-80. 


444 The Economics of Karl Marx: II 


Darwinian concepts are brought in to replace the 
mantic elements out of which it is built up. Its found 
tion is the metaphysical equality between the volume ¢ 
human life force productively spent in the making | 
goods and the magnitude of these goods considered | 
human products. The question of such an equality hi 
no meaning in terms of cause and effect, nor does it be 
in any intelligible way upon the Darwinian question ¢ 
the fitness of any given system of production or distr 
bution. In any evolutionary system of economics ft 
central question touching the efficiency and fitness of ai 
given system of production is necessarily the question ¢ 
to the excess of serviceability in the product over # 
cost of production.** It is in such an excess of servic 
ability over cost that the chance of survival lies for a 
system of production, in so far as the question of survival 
is a question of production, and this matter comes in 
the speculation of Marx only indirectly or incidentall 
and leads to nothing in his argument. 

And, as bearing on the Marxian doctrines of exploit 
tion, there is on Darwinian ground no place for a natur 
right to the full product of labor. What can be argue 
in that connection on the ground of cause and effect sit 
ply is the question as to what scheme of distribution wi 


14 Accordingly, in later Marxian handling of the questions of 
exploitation and accumulation, the attention is centered on the 
“surplus product” rather than on the “surplus value.” It & 
also currently held that the doctrines and practical consequences 
which Marx derived from the theory of surplus value woulé 
remain substantially well founded, even if the theory of sur; 
value was given up. These secondary doctrines could be sa 
—at the cost of orthodoxy —by putting a theory of sur 
product in the place of the theory of surplus value, as in e! 
is done by Bernstein (Socialdemokratie in Theorie und Pra: 
sec. 5. Also various of the essays included in Zur Geschichte ui 
Theorie des Sozialismus), 


The Economics of Karl Mars: II 445 


help or hinder the survival of a given people or a given 
civilisation.*® 

_ But these questions of abstruse theory need not be 
pursued, since they count, after all, but relatively little 
}among the working tenets of the movement. Little need 
be done by the Marxists to work out or to adapt the 
Marxian system of value theory, since it has but slight 
bearing on the main question,— the question of the trend 
‘towards socialism and of its chances of success. It is con- 
‘ceivable that a competent theory of value dealing with 
‘the excess of serviceability over cost, on the one hand, 
and with the discrepancy between price and serviceability, 
on the other hand, would have a substantial bearing upon 
the advisability of the present as against the socialistic 
‘régime, and would go far to clear up the notions of both 
‘socialists and conservatives as to the nature of the points 
in dispute between them. But the socialists have not 
moved in the direction of this problem, and they have the 
excuse that their critics have suggested neither a question 
nor a solution to a question along any such line. None 
‘of the value theorists have so far offered anything that 
could be called good, bad, or indifferent in this connection, 
and the socialists are as innocent as the rest. Economics, 
indeed, has not at this point yet begun to take on a mod- 
ern tone, unless the current neglect of value theory by 
the socialists be taken as a negative symptom of advance, 
indicating that they at least recognise the futility of the 


The “right to the full product of labor” and the Marxian 
theory of exploitation associated with that principle has fallen 
into the background, except as a campaign cry designed to stir 
the emotions of the working class. Even as a campaign cry it 
has not the prominence, nor apparently the efficacy, which it once 
had. The tenet is better preserved, in fact, among the “ ideal- 
‘ists, ” who draw for their antecedents on the French Revolution 
‘and the English philosophy of natural rights, than among the 
latter-day Marxists. 


446 The Economics of Karl Marx: II 


received problems and solutions, even if they are not read 
to make a positive move. 


The shifting of the current point of view, from ro 
mantic philosophy to matter-of-fact, has affected the atti 
tude of the Marxists towards the several articles of theor 
more than it has induced an avowed alteration or a suk 
stitution of new elements of theory for the old. It is al 
ways possible to make one’s peace with a new standpoir 
by new interpretations and a shrewd use of figures o 
speech, so far as the theoretical formulation is concernec 
and something of this kind has taken place in the cas 
of Marxism; but when, as in the case of Marxism, 


stantial changes of appreciable magnitude are apt to sho 
themselves in a changed attitude towards practical ques 
tions. The Marxists have had to face certain practice 
problems, especially problems of party tactics, and th 
substantial changes wrought in their theoretical outlool 
have come into evidence here. The real gravity of t 
changes that have overtaken Marxism would scarcely b 
seen by a scrutiny of the formal professions of the Marx 
ists alone. But the exigencies of a changing situatiot 
have provoked readjustments of the received doctriné 
position, and the shifting of the philosophical standpoin 
and postulates has come into evidence as marking thi 
limits of change in their professions which the socialisti 
doctrinaires could allow themselves. 

The changes comprised in the cultural movement the 
lies between the middle and the close of the nineteentl 
century are great and grave, at least as seen from so neg 
a standpoint as the present day, and it is safe to say tha 
in whatever historical perspective they may be seen, they 
must, in some respects, always assert themselves as un 


The Economics of Karl Marx: II 447 


precedented. So far as concerns the present topic, there 
are three main lines of change that have converged upon 
the Marxist system of doctrines, and have led to its 
latter-day modification and growth. One of these — 
the change in the postulates of knowledge, in the meta- 
physical foundations of theory — has been spoken of al- 
ready, and its bearing on the growth of socialist theory 
‘has been indicated in certain of its general features. 
But, among the circumstances that have conditioned the 
‘growth of the system, the most obvious is the fact that 
‘since Marx’s time his doctrines have come to serve as 
the platform of a political movement, and so have been 
exposed to the stress of practical party politics dealing 
with a new and changing situation. At the same time 
‘the industrial (economic) situation to which the doc- 
trines are held to apply —of which they are the theo- 
‘Tetical formulation—has also in important respects 
| changed its character from what it was when Marx first 
formulated his views. These several lines of cultural 
change affecting the growth of Marxism cannot be held 
apart in so distinct a manner as to appraise the work of 
each separately. They belong inextricably together, as 
do the effects wrought by them in the system. 

In practical politics the Social Democrats have had to 
make up their account with the labor movement, the 
agricultural population, and the imperialistic policy. On 
each of these heads the preconceived programme of 
‘Marxism has come in conflict with the run of events, and 
on each head it has been necessary to deal shrewdly and 
adapt the principles to the facts of the time. The adap- 
tation to circumstances has not been altogether of the 
nature of compromise, although here and there the spirit 
of compromise and conciliation is visible enough. A 
conciliatory party policy may, of course, impose an 


448 The Economics of Karl Marx: II 


adaptation of form and color upon the party principle; 
without thereby seriously affecting the substance of th 
principles themselves; but the need of a conciliatory pol 
icy may, even more, provoke a substantial change of atti 
tude toward practical questions in a case where a shift 
ing of the theoretical point of view makes room for ; 
substantial change. . 
Apart from all merely tactical expedients, the experi 
ence of the past thirty years has led the German Marxist 
to see the facts of the labor situation in a new light, an 
has induced them to attach an altered meaning to 
accepted formulations of doctrine. The facts have ne 
freely lent themselves to the scheme of the Marxist sy 
tem, but the scheme has taken on such a new meaning ¢ 
would be consistent with the facts. The untrouble 
Marxian economics, such as it finds expression in 
Kapital and earlier documents of the theory, has no place 
and no use for a trade-union movement, or, indeed, fo 
any similar non-political organisation among the workin 
class, and the attitude of the Social-Democratic leader, 
of opinion in the early days of the party’s history wa 
accordingly hostile to any such movement,**—as muc 
so, indeed, as the loyal adherents of the classical politica 
economy. That was before the modern industrial er 


16 It is, of course, well known that even in the transaction 
and pronounciamentos of the International a good word is fré 
peatedly said for the trade-unions, and both the Gotha and th 
Erfurt programmes speak in favor of labor organisations, an 
put forth demands designed to further the trade-union endeavor, 
But it is equally well known that these expressions were in goo 
part perfunctory, and that the substantial motive behind thet 


and make use of the unions for the propaganda. The earl 
expressions of sympathy with the unionist cause were mac 
for an ulterior purpose. Later on, in the nineties, there come 
a change in the attitude of the socialist leaders toward th 
unions. ; 


The Economics of Karl Marx: II 449 


_ had got under way in Germany, and therefore before the 


German socialistic doctrinaires had learned by experi- 


ence what the development of industry was to bring with 


it. It was also before the modern scientific postulates had 
begun to disintegrate the neo-Hegelian preconceptions as 
to the logical sequence in the development of institutions. 

In Germany, as elsewhere, the growth of the capitalistic 
system presently brought on trade-unionism; that is to 
say, it brought on an organised attempt on the part of 
the workmen to deal with the questions of capitalistic 
production and distribution by business methods, to settle 
the problems of working-class employment and livelihood 
by a system of non-political, businesslike bargains. But 
the great point of all socialist aspiration and endeavor 


_ is the abolition of all business and all bargaining, and, 


accordingly, the Social Democrats were heartily out of 
sympathy with the unions and their endeavors to make 
business terms with the capitalist system, and make life 
tolerable for the workmen under that system. But the 
union movement grew to be so serious a feature of the 
situation that the socialists found themselves obliged to 
deal with unions, since they could not deal with the 
workmen over the heads of the unions. The Social Dem- 
ocrats, and therefore the Marxian theorists, had to deal 
with a situation which included the union movement, and 
this movement was bent on improving the workman’s 
conditions of life from day to day. Therefore it was 
necessary to figure out how the union movement could 
and must further the socialistic advance; to work into the 
body of doctrines a theory of how the unions belong in 
the course of economic development that leads up to so- 
cialism, and to reconcile the unionist efforts at improve- 


_ ment with the ends of Social Democracy. Not only were 
_ the unions seeking improvement by unsocialistic methods, 


450 The Economics of Karl Marx: II 


but the level of comfort among the working classes was 
in some respects advancing, apparently as a result of these 
union efforts. Both the huckstering animus of the work- 
men in their unionist policy and the possible amelioration | 
of working-class conditions had to be incorporated into. 
the socialistic platform and into the Marxist theory of 
economic development. The Marxist theory of progres- 
sive misery and degradation has, accordingly, fallen into 
the background, and a large proportion of the Marxists 
have already come to see the whole question of working- 
class deterioration in some such apologetic light as is shed 
upon it by Goldscheid in his Verelendungs-oder Meliora- 
tionstheorie. It is now not an unusual thing for orthodox 
Marxists to hold that the improvement of the conditions 
of the working classes is a necessary condition to the 
advance of the socialistic cause, and that the unionist 
efforts at amelioration must be furthered as a means to- 
ward the socialistic consummation. It is recognised that 
the socialistic revolution must be carried through not by 
an anemic working class under the pressure of abject 
privation, but by a body of full-blooded workingmen 
gradually gaining strength from improved conditions of 
life. Instead of the revolution being worked out by the 
leverage of desperate misery, every improvement in work 
ing-class conditions is to be counted as a gain for the 
revolutionary forces. This is a good Darwinism, but it 
does not belong in the neo-Hegelian Marxism. 

Perhaps the sorest experience of the Marxist doc- 
trinaires has been with the agricultural population. No- 
toriously, the people of the open country have not taken 
kindly to socialism. No propaganda and no changes in 
the economic situation have won the sympathy of the 
peasant farmers for the socialistic revolution. Notori- 
ously, too, the large-scale industry has not invaded the 


= 


The Economics of Karl Marr: II 451 


_ agricultural field, or expropriated the small proprietors, 
in anything like the degree expected by the Marxist doc- 
_ trinaires of a generation ago. It is contained in the theo- 


retical system of Marx that, as modern industrial and 


| business methods gain ground, the small proprietor farm- 
| ers will be reduced to the ranks of the wage-proletariat, 


and that, as this process of conversion goes on, in the 


course of time the class interest of the agricultural popu- 


lation will throw them into the movement side by side 


with the other wage-workmen.’7 But at this point the 


facts have hitherto not come out in consonance with the 
Marxist theory. And the efforts of the Social Democrats 
to convert the peasant population to socialism have been 
practically unrewarded. So it has come about that the 
political leaders and the keepers of the doctrines have, 


_ tardily and reluctantly, come to see the facts of the agra- 


rian situation in a new light, and to give a new phrasing 
to the articles of Marxian theory that touch on the for- 
tunes of the peasant farmer. It is no longer held that 


either the small properties of the peasant farmer must 


be absorbed into larger properties, and then taken over 
by the State, or that they must be taken over by the State 
directly, when the socialistic revolution is established. 
On the contrary, it is now coming to be held that the 
peasant proprietors will not be disturbed in their hold- 
ings by the great change. The great change is to deal 
with capitalistic enterprise, and the peasant farming is 
not properly “capitalistic.” It is a system of produc- 


tion in which the producer normally gets only the product 


of his own labor. Indeed, under the current régime of 
markets and credit relations, the small agricultural pro- 


_ ducer, it is held, gets less than the product of his own 
_ labor, since the capitalistic business enterprises with which 


17 Cf. Kapital, vol. i, ch. xiii, sect. 10. 


452 The Economics of Karl Marx: II 


he has to deal are always able to take advantage of hi 
So it has become part of the overt doctrine of socialists 
that as regards the peasant farmer it will be the consistent 
aim of the movement to secure him in the untroubled en- 
joyment of his holding, and free him from the vexatious: 
exactions of his creditors and the ruinous business traffic 
in which he is now perforce involved. According to the 
revised code, made possible by recourse to Darwinian 
concepts of evolution instead of the Hegelian three-phase 
dialectic, therefore, and contrary to the earlier prognosti- 
cations of Marx, it is no longer held that agricultural in- 
dustry must go through the capitalistic mill; and it is 
hoped that under the revised code it may be possible to 
enlist the interest and sympathy of this obstinately con- 
servative element for the revolutionary cause. The 
change in the official socialist position on the agricultural 
question has come about only lately, and is scarcely yet 
complete, and there is no knowing what degree of success 
it may meet with either as a matter of party tactics or as 
a feature of the socialistic theory of economic develop- 
ment. All discussions of party policy, and of theory so 
far as bears on policy, take up the question; and nearly 
all authoritative spokesmen of socialism have modified 
their views in the course of time on this point. 
The socialism of Karl Marx is characteristically in- 
clined to peaceable measures and disinclined to a coercive 
government and belligerent politics. It is, or at least it 
was, strongly averse to international jealousy and pa- 
triotic animosity, and has taken a stand against arma 
ments, wars, and dynastic aggrandisement. At the time 
of the French-Prussian war the official organisation of 
Marxism, the International, went so far in its advocacy 
of peace as to urge the soldiery on both sides to refuse 
to fight. After the campaign had warmed the blood of 


The Economics of Karl Marx: IT 453 


_ the two nations, this advocacy of peace made the Inter- 


national odious in the eyes of both French and Germans. 
_ War begets patriotism, and the socialists fell under the 
reproach of not being sufficiently patriotic. After the 
conclusion of the war the Socialistic Workingmen’s Party 
of Germany sinned against the German patriotic senti- 
ment in a similar way and with similarly grave results. 
Since the foundation of the empire and of the Social- 
Democratic party, the socialists and their doctrines have 


_ passed through a further experience of a similar kind, 


but on a larger scale and more protracted. The govern- 
ment has gradually strengthened its autocratic position 
at home, increased its warlike equipment, and enlarged 


_ its pretensions in international politics, until what would 
_ have seemed absurdly impossible a generation ago is now 


_ submitted to by the German people, not only with a good 


grace, but with enthusiasm. During all this time that 


part of the population that has adhered to the socialist 
ideals has also grown gradually more patriotic and more 
loyal, and the leaders and keepers of socialist opinion 
have shared in the growth of chauvinism with the rest of 


the German people. But at no time have the socialists 
_ been able to keep abreast of the general upward movement 
in this respect. They have not attained the pitch of reck- 


less loyalty that animates the conservative German pa- 
triots, although it is probably safe to say that the Social 
Democrats of to-day are as good and headlong patriots 
as the conservative Germans were a generation ago. 
During all this period of the new era of German political 
life the socialists have been freely accused of disloyalty 
to the national ambition, of placing their international 
aspirations above the ambition of imperial aggrandise- 
_ ment. 
The socialist spokesmen have been continually on the 


454 The Economics of Karl Marx: II 


defensive. They set out with a round opposition to any 
considerable military establishment, and have more and 
more apologetically continued to oppose any “ undue” 
extension of the warlike establishments and the warlike 
policy. But with the passage of time and the habitua- 
tion to warlike politics and military discipline, the infec- 
tion of jingoism has gradually permeated the body of 
Social Democrats, until they have now reached such a 
pitch of enthusiastic loyalty as they would not patiently 
hear a truthful characterisation of. The spokesmen now 
are concerned to show that, while they still stand for 
international socialism, consonant with their ancient po- 
sition, they stand for national aggrandisement first and 
for international comity second. The relative importance 
of the national and the international ideals in German 
socialist professions has been reversed since the seven- 
ties.** The leaders are busy with interpretation of their 
earlier formulations. They have come to excite them- 
selves over nebulous distinctions between patriotism and 
jingoism. The Social Democrats have come to be Ger- 
man patriots first and socialists second, which comes to 
saying that they are a political party working for the 
maintenance of the existing order, with modifications. 
They are no longer a party of revolution, but of reform, 
though the measure of reform which they demand greatly 
exceeds the Hohenzollern limit of tolerance. They are 
now as much, if not more, in touch with the ideas of Eng- 
lish liberalism than with those of revolutionary Marx- 
ism. ; 

The material and tactical exigencies that have grown 
out of changes in the industrial system and in the political 
situation, then, have brought on far-reaching changes of 


18 Cf. Kautsky, Erfurter Programm, ch, v, sect. 13; Bernstein, 
V oraussetzungen, ch. iv, sect. e. 


The Economics of Karl Marx: II 455 


adaptation in the position of the socialists. The change 
may not be extremely large at any one point, so far as 
regards the specific articles of the programme, but, taken 
as a whole, the resulting modification of the socialistic 
position is a very substantial one. The process of change 
is, of course, not yet completed,— whether or not it ever 
will be,— but it is already evident that what is taking 
place is not so much a change in amount or degree of 


‘conviction on certain given points as a change in kind,— 


a change in the current socialistic habit of mind. 

The factional discrepancies of theory that have occu- 
pied the socialists of Germany for some years past are 
evidence that the conclusion, even a provisional conclu- 
sion, of the shifting of their standpoint has not been 
reached. It is even hazardous to guess which way the 
drift is setting. It is only evident that the past stand- 
point, the standpoint of neo-Hegelian Marxism, cannot 
be regained,— it is a forgotten standpoint. For the im- 
mediate present the drift of sentiment, at least among the 
educated, seems to set toward a position resembling that 
of the National Socials and the Rev. Mr. Naumann; 
that is to say, imperialistic liberalism. Should the condi- 


tions, political, social, and economic, which to-day are 


chiefly effective in shaping the habits of thought among 


the German people, continue substantially unchanged and 


continue to be the chief determining causes, it need sur- 
prise no one to find German socialism gradually chang- 
ing into a somewhat characterless imperialistic democ- 


‘racy. The imperial policy seems in a fair way to get 


the better of revolutionary socialism, not by repressing 


_ it, but by force of the discipline in imperialistic ways of 


thinking to which it subjects all classes of the population. 
How far a similar process of sterilisation is under way, 


ee eo 


THE MUTATION THEORY AND THE BLOND 
% RACE+ 
‘Tue theories of racial development by mutation, associ- 
‘ated with the name of Mendel, when they come to be 
freely applied to man, must greatly change the com- 
pp esion of many currently debated questions of race — 
‘as to origins, migrations, dispersion, chronology, cul- 
‘tural derivation and sequence. In some ae the new 
‘theories should simplify current problems of ethnology, 
and they may even dispense with many analyses and spec- 
ulations that have seemed of great moment in the past. 
_ The main postulate of the Mendelian theories — the 
stability of type — has already done much service in an- 
_ thropological science, being commonly assumed as a mat- 
“ter of course in arguments dealing with the derivation 
and dispersion of races and peoples. It is only by force 
of this assumption that ethnologists are able to identify 
any given racial stock over intervals of space or time, and 
so to trace the racial affinities of any given people. 
_ Question has been entertained from time to time as to the 
facial fixity of given physical traits—as, e.g., stature, 
the cephalic indices, or hair and eye color — but on the 
whole these and other standard marks of race are still 
i accepted as secure grounds of identification.2 Indeed, 
without some such assumption any ethnological inquiry 
“must degenerate into mere wool-gathering. 


_ 1Reprinted by permission from The Journal of Race Develop- 
ment, Vol. III, No. 4. 


_ 2Cf., however, W. Ridgeway, “The Application of Zodlogical 
‘Laws to Man,” Report, British Association for Advancement of 
Science (Dublin), 1908. 


457 


458 The Blond Race 


But along with this, essentially Mendelian, postulate o 
the stability of types, ethnologists have at the same tim 
habitually accepted the incompatible Darwinian doctrin 
that racial types vary incontinently after a progressiv 
fashion, arising through insensible cumulative variation 
and passing into new specific forms by the same method 
under the Darwinian rule of the selective survival of sligh 
and unstable (non-typical) variations. The effect o 
these two incongruous premises has been to leave discus 
sions of race derivation somewhat at loose ends whe 
ever the two postulates cross one another. 

If it be assumed, or granted, that racial types are stabl 
it follows as a matter of course that these types or racé 
have not arisen by the cumulative acquirement of 
stable non-specific traits, but must have originated b 
mutation or by some analogous method, and this vie} 
must then find its way into anthropology as into tl 
other biological sciences. When such a step is taken a 
extensive revision of questions of race will be unavoid 
able, and an appreciable divergence may then be looke 
for among speculations on the mutational affinities of th 
several races and cultures. 

Among matters so awaiting revision are certain broz 
questions of derivation and ethnography touching th 
blond race or races of Europe. Much attention, and i 
deed much sentiment, has been spent on this gener 
topic. The questions involved are many and divers 
and many of them have been subject of animated cot 
troversy, without definitive conclusions. 

The mutation theories, of course, have immediately 
do with the facts of biological derivation alone, but when 
the facts are reviewed in the light of these theories it 
be found that questions of cultural origins and relatiot 
ship are necessarily drawn into the inquiry. In partict 


. The Blond Race 459 


‘lar, an inquiry into the derivation and distribution of the 
blond stock will so intimately involve questions of the 
“Aryan speech and institutions as to be left incomplete 
without a somewhat detailed attention to this latter range 
of questions. So much so that an inquiry into the advent 
and early fortunes of the blond stock in Europe will fall, 
‘by convenience, under two distinct but closely related 
‘captions: The Origin of the Blond Type, and The 
Derivation of the Aryan Culture. 


(a) It is held, on the one hand, that there is but a sin- 
gle blond race, type or stock (Keane, Lapouge, Sergi), 
and on the other hand that there are several such races 
or types, more or less distinct but presumably related 
(Deniker, Beddoe, and other, especially British, ethnol- 
ogists). (b) There is no good body of evidence going 
to establish a great antiquity for the blond stock, and 
there are indications, though perhaps inconclusive, that 
the blond strain, including all the blond types, is of rela- 
tively late date— unless a Berber (Kabyle) blond race 
‘is to be accepted in a more unequivocal manner than 
hitherto. (c) Neither is there anything like convincing 
evidence that this blond strain has come from outside of 
| Europe — except, again, for the equivocal Kabyle — or 
that any blond race has ever been widely or permanently 
distributed outside of its present European habitat. (d) 
The blond race is not found unmixed. In point of pedi- 
: gree all individuals showing the blond traits are hybrids, 
and the greater number of them show their mixed blood 
‘in their physical traits. (e) There is no community, 
darge or small, made up exclusively of blonds, or nearly 
‘so, and there is no good evidence available that such an 
all-blond or virtually all-blond community ever has ex- 
isted, either in historic or prehistoric times. The race 


460 The Blond Race 


appears never to have lived in isolation. (f) It occursi 
several (perhaps hybrid) variants — unless these variant 
are to be taken (with Deniker) as several distinct race 
(g) Counting the dolicho-blond as the original type o 
the race, its nearest apparent relative among the races 
mankind is the Mediterranean (of Sergi), at least in poit 
of physical traits. At the same time the blond race, or ¢ 
least the dolicho-blond type, has never since neolithi 
times, so far as known, extensively and permanently live 
in contact with the Mediterranean. (h) The variot 
(national) ramifications of the blond stock — or rathe 
the various racial mixtures into which an appreciabl 
blond element enters — are all, and to all appearance hay 
always been, of Aryan (“ Indo-European,” “ Indo-Ge1 
manic”) speech— with the equivocal exception of th 
Kabyle. (i) Yet far the greater number and variet 
(national and linguistic) of men who use the Arya 
speech are not prevailingly blond, or even appreciabl 
mixed with blond. (j) The blond race, or the people 
with an appreciable blond admixture, and particularh 
the communities in which the dolicho-blond element pre 
vails, show little or none of the peculiarly Aryan institu 
tions — understanding by that phrase not the known insti 
tutions of the ancient Germanic peoples, but that range 0 
institutions said by competent philologists to be reflecte 
in the primitive Aryan speech. (k) These consideration 
raise the presumption that the blond race was not orig 
inally of Aryan speech or of Aryan culture, and they als 
suggest (1) that the Mediterranean, the nearest apparen 
relative of the dolicho-blond, was likewise not originall 
Aryan. 


Accepting the mutation theory, then, for the purpose i 
hand, and leaving any questions of Aryanism on one sid 


The Blond Race 461 


the present, a canvass of the situation so outlined may 
e offered in such bold, crude and summary terms as 
ald be admissible in an analysis which aims to De ten- 
itive and provisional only. It may be conceived that the 
lichocephalic blond originated as a mutant of the Medi- 
ranean type (which it greatly resembles in its scheme 
biometric measurements *) probably some time after 
at race had effected a permanent lodgment on the conti- 
ent of Europe. The Mediterranean stock may be held 
Sei pi and Keane) to have come into Europe from 
ifrica,* whatever its remoter derivation may have been. 
lf is, of course, not impossible that the mutation which 
ave rise to the dolicho-blond may have occurred before 
. stock left Africa, or rather before it was shut 
1 a Africa by the submergence of the land connection 
ss Sicily, but the probabilities seem to be against such 
* a w. lhe conditions would appear to have been less 
prable to a mutation of this kind in the African habitat 
the parent stock than in Europe, and less favorable in 
turope during earlier quaternary time than toward the 
pse of the glacial period. 
The causes which give rise to a variation of type have 
lways been sufficiently obscure, whether the origin of 
es be conceived after the Darwinian or the Mendelian 
hion, and the mutation theories have hitherto afforded 
tle light on that question. Yet the Mendelian postulate 
nat the type is stable except for such a mutation as shall 
sstablish a new type raises at least the presumption that 
ich a mutation will take place only under exceptional 
ircumstances, that is to stay, under circumstances so sub- 
tantially different from what the type is best adapted to 
s to subject it to some degree of physiological strain. It 
3 Cf. Sergi, The Mediterranean Race, ch. xi, xiii. 
pace. Ari e Italici; Keane, Man Past and Present, ch. xii. 


462 The Blond Race 


is to be presumed that no mutation will supervene so long 
as the conditions of life do not vary materially from what 
they have been during the previous uneventful life-history 
of the type. Such is the presumption apparently involved 
in the theory and such is also the suggestion afforded by 
the few experimental cases of observed mutation, as, ¢.g., 
those studied by De Vries. 

A considerable climatic change, such as would seriotdl 
alter the conditions of life either directly or through its 
effect on the food supply, might be conceived to bring on 
mutating state in the race; or the like effect might be in 
duced by a profound cultural change, particularly any 
such change in the industrial arts as would radically affec 
the material conditions of life. These considerations 
mainly speculative it is true, suggest that the dolicho-blond 
mutant could presumably have emerged only at a time 
when the parent stock was exposed to notably novel con- 
ditions of life, such as would be presumed (with D 
Vries) to tend to throw the stock into a specifically un- 
stable (mutating) state; at the same time these novel con 
ditions of life must also have been specifically of such ¢ 
nature as to favor the survival and multiplication of this 
particular human type. The climatic tolerance of the 
dolicho-blond, e.g., is known to be exceptionally narrow. 
Now, it is not known, indeed there is no reason to pre- 
sume, that the Mediterranean race was exposed to such 
variations of climate or of culture before it entered 
Europe as might be expected to induce a mutating stat 
in the stock, and at the same time a mutant gifted with 
the peculiar climatic intolerance of the dolicho-bloni 
would scarcely have survived under the conditions offerec 
by northern Africa in late quaternary time. But the 
quired conditions are had later on in Europe, after tht 
Mediterranean was securely at home in that continent 


The Blond Race 463 


| The whole episode. may be conceived to have run off 
somewhat in the following manner. The Mediterranean 
face is held to have entered Europe in force during qua- 
ary time, presumably after the quaternary period was 
ell advanced, most likely during the last genial, inter- 
glacial period. This race then brought the neolithic cul- 
ture, but without the domestic animals (or plants?) that 
e a characteristic feature of the later neolithic age, and 
it encountered at least the remnants of an older, palaeo- 
lithic population. This older European population was 
_ made up of several racial stocks, some of which still per- 
sist as obscure and minor elements in the later peoples of 
Europe. The (geologic) date to be assigned this intru- 
on of the Mediterranean race into Europe is of course 
not, and can perhaps never be, determined with any de- 
ree of nicety or confidence. But there is a probability 
that it coincides with the recession of the ice-sheet, fol- 
‘lowing one or another of the severer periods of glacia- 
ions, that occurred before the submergence of the land 
ection between Europe and Africa, over Gibraltar, 
icily, and perhaps Crete. How late in quaternary time 
e final submergence of the Mediterranean basin occurred 
still a matter of surmise; the intrusion of the Mediter- 
anean race into Europe appears, on archaeological evi- 
dence, to have occurred in late quaternary time, and in 
the end this archaeological evidence may help to decide the 
geologic date of the severance of Europe from Africa. 

_ The Mediterranean race seems to have spread easily 
_ over the habitable surface of Europe and shortly to have 
"grown numerous and taken rank as the chief racial ele- 
ment in the neolithic population; which argues that no 
“very considerable older population occupied the European 
continent at the time of the Mediterranean invasion; 
which in turn implies that the fairly large (Magdalenian) 


464. The Blond Race 


population of the close of the palaeolithic age was in great 
part destroyed or expelled by the climatic changes that 
coincided with or immediately preceded the advent of the 
Mediterranean race. The known characteristics of the 
Magdalenian culture indicate a technology, a situation and’ 
perhaps a race, somewhat closely paralleled by the E 
kimo;* which argues that the climatic situation before 
which this Magdalenian race and culture gave way would 
have been that of a genial interglacial period rather than 
a period of glaciation. 

During this genial (perhaps sub-tropical) inter-glacial 
period immediately preceding the last great glaciation the 
Magdalenian stock would presumably find Europe cli- 
matically untenable, judging by analogy with the Eskimo; 
whereas the Mediterranean stock should have found it an 
eminently favorable habitat, for this race has always suc- 
ceeded best in a warm-temperate climate. Both the ex- 
tensive northward range of the early neolithic (Mediter- 
ranean) settlements and the total disappearance of the 
Magdalenian culture from the European continent point to 
a climatic situation in Europe more favorable to the for- 
mer race and more unwholesome for the latter than the 
conditions known to have prevailed at any time since the 
last interglacial period, especially in the higher latitude 
The indications would seem to be that the whole of 
Europe, even the Baltic and Arctic seaboards, became cli- 
matically so fully impossible for the Magdalenian race 
during this interglacial period as to result in its extine- 
tion or definitive expulsion; for when, in recent times, 
climatically suitable conditions return, on the Arctic sea- 
board, the culture which takes the place that should have 
been occupied by the Magdalenian is the Finnic (Lapp)— 


5 Cf. W. J. Sollas, “ Palaeolithic Races and their Modern Rep- 
resentatives,” Science Progress, vol. iv, 1909-1910. 


The Blond Race 465 


la culture unrelated to the Magdalenian either in race or 
| technology, although of much the same cultural level and 
| dealing with a material environment of much the same 
‘character. And this genial interval that was fatal to the 
_Magdalenian was, by just so much, favorable to the Medi- 
| terranean race. 
F But glacial conditions presently returned, though with 
less severity than the next preceding glacial period; and 
roughly coincident with the close of the genial interval in 
Europe the land connection with Africa was cut off by 
“submergence, shutting off retreat to the south. How far 
communication with Asia may have been interrupted dur- 
ing the subsequent cold period, by the local glaciation of 
the Caucasus, Elburz and Armenian highlands, is for the 
present apparently not to be determined, although it is to 
be presumed that the outlet to the east would at least be 
‘seriously obstructed during the glaciation. There would 
then be left available for occupation, mainly by the Medi- 
_terranean race, central and southern Europe together with 
the islands, notably Sicily and Crete, left over as remnants 
of the earlier continuous land between Europe and Africa. 
‘The southern extensions of the mainland, and more par- 
ticularly the islands, would still afford a favorable place 
for the Mediterranean race and its cultural growth. So 
that the early phases of the great Cretan (Aegean) civil- 
isation are presumably to be assigned to this period that 
is covered by the last advance of the ice in northern Eu- 
‘rope. But the greater portion of the land area so left 
accessible to the Mediterranean race, in central or even in 
southern Europe, would have been under glacial or sub- 
glacial climatic conditions. or this race, essentially na- 
tive to a warm climate, this situation on the European 
‘Mainland would be sufficiently novel and trying, particu- 
Tarly throughout that ice-fringed range of country where 


466 The Blond Race 


they would be exposed to such cold and damp as this 
race has never easily tolerated. 

The situation so outlined would afford such a conditior 
of physiological strain as might be conceived to throw the 
stock into a specifically unstable state and so bring on a 
phase of mutation. At the same time this situation, cli- 
matic and technological, would be notably favorable to tt e 
survival and propagation of a type gifted with all the 
peculiar capacities and limitations of the dolicho-blond; 
so that any mutant showing the traits characteristic of 
that type would then have had an eminently favorable 
chance of survival. Indeed, it is doubtful, in the present 
state of the available evidence, whether such a type of mar 
could have survived in Europe from or over any perio¢ 
of quaternary time prior to the last period of glaciation. 
The last preceding interglacial period appears to have 
been of a sufficiently genial (perhaps sub-tropical) char- 
acter throughout Europe to have definitively eliminated 
the Magdalenian race and culture, and a variation of cli 
mate in the genial sense sufficiently pronounced to mak 
Europe absolutely untenable for the Magdalenian — pre: 
sumed to be something of a counterpart to the Eski 
both in race and culture — should probably have reachec¢ 
the limit of tolerance for the dolicho-blond as well. The 
latter is doubtless not as intolerant of a genial — warm: 
temperate — climate as the former, but the dolicho-bloné 
after all stands much nearer to the Eskimo in this matter 
of climatic tolerance than to either of the two chief Euro- 
pean stocks with which it is associated. Apparently no 
racial stock with a climatic tolerance approximately like 
that of the Eskimo, the Magdalenian, or the current race: 
of the Arctic seaboard, survived over the last inter-gla 
cial period; and if the dolicho-blond is conceived to hav 
lived through that period it would appear to have been by 


a The Blond Race 467 


‘a precariously narrow margin. So that, on one ground 


| and another, the mutation out of which the dolicho-blond 


has arisen is presumably to be assigned to the latest period 


| of glaciation in Europe, and with some probability to the 


time when the latest glaciation was at its maximum, and 
to the region where glacial and seaboard influences com- 


_ bined to give that racial type a differential advantage over 


all others. 
This dolicho-blond mutation may, of course, have oc- 


| curred only once, in a single individual, but it should 
seem more probable, in the light of De Vries’ experi- 
| ments, that the mutation will have been repeated in the 
_ Same specific form in several individuals in the same gen- 
eral locality and in the same general period of time. In- 
| deed, it would seem highly probably that several typically 


distinct mutations will have occurred, repeatedly, at 


| roughly the same period and in the same region, giving 


Tise to several new types, some of which, including the 


 dolicho-blond, will have survived. Many, presumably the 
greater number, of these mutant types will have disap- 


peared, selectively, being unfit to survive under those sub- 
glacial seaboard conditions that were eminently favorable 
to the dolicho-blond; while other mutants arising out of 
‘the same mutating period and adapted to climatic condi- 
tions of a more continental character, suitable to more of 
a continental habitat, less humid, at a higher altitude and 
with a wider seasonal variation of temperature, may have 


_ survived in the regions farther inland, particularly east- 


ward of the selectively defined habitat of the dolicho- 
blond. These latter may have given rise to several blond 
Taces, such as are spoken for by Deniker® and certain 
British ethnologists. 


 6The Races of Mankind; and “Les six races composant la 


‘population de l'Europe,” J ournal Anth. Inst., 1906. 


468 The Blond Race 


The same period of mutation may well have given rise 
also to one or more brunet types, some of which may 
have survived. But if any new brunet type has come 
within a period so recent as this implies, the fact has not 
been noted or surmised hitherto — unless the brunet races 
spoken for by Deniker are to be accepted as typically dis- 
tinct and referred to such an origin. The evidence for 
the brunet stocks has not been canvassed with a questior 
of this kind in view. These stocks have not been subjec 
of such eager controversy as the dolicho-blond, and the 
attention given them has been correspondingly less. The 
case of the blond is unique in respect of the attention spen 
on questions of its derivation and prehistory, and it is also 
singular in respect of the facility with which it can be iso: 
lated for the purposes of such an inquiry. This large and 
persistent attention, from all sorts of ethnologists, has 
brought the evidence bearing on the dolicho-blond inte 
such shape as to permit more confident generalisations 
regarding that race than any other. | 

In any case the number of mutant individuals, whethet 
of one or of several specific types, will have been very} 
few as compared with the numbers of the parent stock 
from which they diverged, even if they may have beet 
somewhat numerous as counted absolutely, and the sur 
vivors whose offspring produced a permanent effect on th 
European peoples will have been fewer still. It results 
that these surviving mutants will not have been isolatec 
from the parent stock, and so could not breed in isolation 
but must forthwith be crossed on the parent stock ané¢ 
could therefore yield none but hybrid offspring. Fron 
the outset, therefore, the community or communities it 
which the blond mutants were propagated would be mad 
up of a mixture of blond and brunet, with the brune 
greatly preponderating. It may be added that in al 


The Blond Race 469 


‘probability there were also present in this community 
rom the start one or more minor brunet elements besides 


“phalic brunet (Alpine) race comes into the case; so that 
e chances favor an early and persistent crossing of the 
‘dolicho-blond with more than one brunet type, and hence 
they favor complications and confusion of types from the 
‘start. It follows that, in point of pedigree, according to 
is view there neither is nor ever has been a pure-bred 
‘dolicho-blond individual since the putative original mutant 
“with which the type came in. But under the Mendelian 
e of hybrids it is none the less to be expected that, in 
‘the course of time and of climatically selective breeding, 


some up from time to time showing the type characters 
unmixed and unweakened, and effectively pure-bred in 


gill probably have emerged somewhat frequently under 
“conditions favorable to the pure type. The selective ac- 
‘tion of the conditions of life in the habitat most favorable 
to the propagation of the dolicho-blond has worked in a 


‘ality is more than half blond. 

_ Placed as it is in a community of nations made up of a 
“hybrid mixture of several racial stocks there is probably 
no way at present of reaching a convincing demonstration 


470 The Blond Race 


of the typical originality of this dolicho-blond mutant, as 
contrasted with the other blond types with which it is as 
sociated in the European population; but certain genera 
considerations go decidedly, perhaps decisively, to enfore 
such a view: (a) This type shows such a pervasive resem: 
blance to a single one of the known older and more widel 
distributed types of man (the Mediterranean) as to sug 
gest descent by mutation from this one rather than deriva 
tion by crossing of any two or more known types. The 
like can not be said of the other blond types, all and sev: 
eral of which may plausibly be explained as hybrids o! 
known types. They have the appearance of blends, 
rather of biometrical compromises, between two or moreé 
existing varieties of man. Whereas it does not seem 
feasible to explain the dolicho-blond as such a blend o: 
compromise between any known racial types. (b) The 
dolicho-blond occurs, in a way, centrally to the othet 
blond types, giving them a suggestive look of being rami 
fications of the blond stock, by hybridisation, into regions 
not wholly suited to the typical blond. The like cam 
scarcely be said for any of the other European types oi 
races. The most plausible exception would be Deniker’s 
East-European or Oriental race, Beddoe’s Saxon, whicel 
stands in a somewhat analogous spacial relation to the 
other blond types. But this brachycephalic blond is noi 
subject to the same sharp climatic limitations that hedg 


i 


about the dolicho-blond ; it occurs apparently with equally 
secure viability within the littoral home area of the doli 
cho-blond and in continental situations where condition: 
of altitude and genial climate would bar the latter from 
permanent settlement. The ancient and conventionally} 
accepted center of diffusion of blondness in Europe lies 
within the seaboard region bordering on the south Baltic 


the North Sea and the narrow waters of the Scandinaviai 


et 


F The Blond Race 471 


| 
| peninsulas. Probably, if this broad central area of dif- 
| fusion were to be narrowed down to a particular spot, 
| the consensus of opinion as to where the narrower area of 
characteristic blondness is to be looked for, would con- 
_verge on the lands immediately about the narrow Scandi- 
/ mavian waters. This would seem to hold true for historic 
and for prehistoric times alike. This region is at the 
same time, by common consent, the peculiar home of the 
3 dolicho-blond, rather than of any other blond type. (c) 
_ The well known but little discussed climatic limitation of 
‘the blond race applies particularly to the dolicho-blond, 


I 
Bend only in a pronouncedly slighter degree to the other 
blond types. The dolicho-blond is subject to a strict re- 
| gional limitation, the other blond types to a much less 
definite and wider limitation of the same kind. Hence 
"these others are distributed somewhat widely, over regions 
_ often remote and climatically different from the home area 
_ of the dolicho-blond, giving them the appearance of being 
dispersed outward from this home area as hybrid exten- 
sions of the central and typical blond stock. A further 
‘and equally characteristic feature of this selective local- 
isation of the dolicho-blond race is the fact that while this 
race does not succeed permanently outside the seaboard 
region of the south Baltic and North Sea, there is no 
similar selective bar against other races intruding into 
this region. Although the dolicho-blond perhaps succeeds 
better within its home area than any other competing 
stock or type, yet several other types of man succeed so 
well within the same region as to hold it, and apparently 
: always to have held it, in joint tenancy with the dolicho- 
blond. 
A close relationship, amounting to varietal identity, of 
‘the Kabyle with the dolicho-blond has been spoken for by 
— and by other ethnologists. But the very different 
} 
| 


472 The Blond Race 


climatic tolerance of the two races should put such an 
identity out of the question. The Kabyle lives and thrives 
best, where his permanent home area has always been, in 
a high and dry country, sufficiently remote from the sez 
to make it a continental rather than a littoral habitat 
The dolicho-blond, according to all available evidence, car 
live in the long run only in a seaboard habitat, damp and 
cool, at a high latitude and low altitude. There is na 
known instance of this race having gone out from 1 
home area on the northern seaboard into such a region a 
that inhabited by the Kabyle and having survived for ai 
appreciable number of generations. That this type 0 
man should have come from Mauritania, where it coul 
apparently not live under the conditions known to hav 
prevailed there in the recent or the remoter past, woul 
seem to be a biologic impossibility. Hitherto, when th 
dolicho-blond has migrated into such or a similar habita 
it has not adapted itself to the new climatic requiremer 
but has presently disappeared off the face of the land 
Indeed, the experiment has been tried in Mauritaniat 
territory. If the Kabyle blond is to be correlated witl 
those of Europe, it will in all probability have to be as 
signed an independent origin, to be derived from an earlie 
mutation of the same Mediterranean stock to which th 
dolicho-blond is to be traced. 

Questions of race in Europe are greatly obscured by th 
prevalence of hybrid types having more or less fixity an 
being more or less distinctly localised. The existing Et 
ropean peoples are hybrid mixtures of two or more racial 
stocks. The further fact is sufficiently obvious, though} 
has received less critical attention than might be, tha 
these several hybrid populations have in the course 0 
time given rise to a number of distinct national and locé 
types, differing characteristically from one another an 


The Blond Race 473 


having acquired a degree of permanence, such as to simu- 
ate racial characters and show well marked national and 
cal traits in point of physiognomy and temperament. 
Presumably, these national and local types of physique 
d temperament are hybrid types that have been selec- 
ively bred into these characteristic forms in adaptation to 
ae peculiar circumstances of environment and culture 
mder which each particular local population is required 
9 live, and that have been so fixed (provisionally) by 
ective breeding of the hybrid material subject to such 
locally uniform conditions — except so far as the local 
haracters in question are of the nature of habits and are 
zemselves therefore to be classed as an institutional ele- 
ment rather than as characteristics of race. 

. ‘Tt is evident that under the Mendelian law of hybridi- 
‘sation the range of favorable, or viable, variations in any 
brid population must be very large — much larger than 
range of fluctuating (non-typical) variations obtain- 
ible under any circumstances in a pure-bred race. It also 
ollows from these same laws of hybridisation that by 
ittue of the mutual exclusiveness of allelomorphic char- 
ers or groups of characters it is possible selectively to 


haracters drawn from each of the two or more parent 
tocks engaged, and that such a composite pure line may 
electively be brought to a provisional fixity * in any such 
ybrid population. And under conditions favorable to a 
ype endowed with any given hybrid combination of char- 
acters so worked out the given hybrid type (composite 
‘pure line) may function in the racial mixture in which it 
is so placed very much as an actual racial type would be- 
have under analogous circumstances; so that, e.g., under 


_ Illustrated by the various pure breeds or “races” of do- 
Mestic animals. 


474 The Blond Race 


continued intercrossing such a hybrid population woul 
tend cumulatively to breed true to this provisionally stab 
hybrid type, rather than to the actual racial type repr 
sented by any one of the parent stocks of which the hybri 
population is ultimately made up, unless the local cond 
tions should selectively favor one or another of these ult 
mate racial types. Evidently, too, the number of suc 
provisionally stable composite pure lines that may | 
drawn from any hybrid mixture of two or more paref 
stocks must be very considerable — indeed virtually ui 
limited ; so that on this ground there should be room z 
any conceivable number of provisionally stable national 
local types of physique and temperament, limited only b 
the number of characteristically distinguishable local et 
vironments or situations that might each selectively act 
characterise and establish a locally characteristic compo: 
ite pure line ; each answering to the selective exigencies ¢ 
the habitat and cultural environment in which it is place 
and each responding to these exigencies in much the san 
fashion as would an actual racial type — provided onl 
that this provisionally stable composite pure line is nm 
crossed on pure-bred individuals of either of the parent 
stocks from which it is drawn, pure-bred in respect ¢ 
the allelomorphic characters which give the hybrid 
its typical traits. 

When the hybrid type is so crossed back on one or othe 
of its parent stocks it should be expected to break down 
but in so slow-breeding a species as man, with so large 
complement of unit characters (some 4000 it has been 
estimated), it will be difficult to decide empirically which 
of the two lines — the hybrid or the parent stock — prove 
itself in the offspring effectively to be a racial type; that i 
to say, which of the two (or more) proves to be an ulti 
mately stable type arisen by a Mendelian mutation, a 


The Blond Race 475 


which is a provisionally stable composite pure line selec- 
vely derived from a cross. The inquiry at this point, 


ent climatic conditions, should apparently incline to the 
‘view that they are hybrid types, of the nature of provi- 
‘sionally stable composite pure lines. 
So far, therefore, as the evidence has yet been can- 
‘yassed, it seems probable on the whole that the dolicho- 
blond is the only survivor from among the several mutants 
hat may have arisen out of this presumed mutating pe- 
riod ; that the other existing blond types, as well as certain 
‘brunets, are derivatives of the hybrid offspring of the 
dolicho-blond crossed on the parent Mediterranean stock 
on other brunet stocks with which the race has been in 
contact early or late ; and that several of these hybrid lines 
hhave in the course of time selectively been established as 
provisionally stable types (composite pure lines), break- 


_ &Mr. R. B. Bean’s discussion of Deniker’s “Six Races,” e. g., 
goes far to show that such is probably the standing of the blond 
types, other than the dolicho-blond, among these six races of 
Europe; although such is not the conclusion to which Mr. Bean 
-comes. Philippine Journal of Science, September, 1909. 


476 The Blond Race 


be claimed for any one of the blond types or stocks it ¢ 
best be claimed for the dolicho-blond, while the otl 
blond types may better be accounted for as the outcot 
- of the crossing of this stock on one or another of 1 
brunet stocks of Europe. 


THE BLOND RACE AND THE ARYAN } 
CULTURE * 


| It has been argued in an earlier paper? that the blond 
|type or types of man (presumably the dolichocephalic 
| blond) arose by mutation from the Mediterranean stock 
during the last period of severe glaciation in Europe. 
This would place the emergence of this racial type roughly 
‘coincident with the beginning of the European neolithic; 
the evidence going presumptively to show that the neo- 
fithic technology came into Europe with the Mediterra- 
-nean race, at or about the same time with that race, and 
that the mutation which gave rise to the dolicho-blond took 
‘place after the Mediterranean race was securely settled 
in Europe. Since this blond mutant made good its sur- 
vival under the circumstances into which it so was thrown 
it should presumably be suited by native endowment to the 
industrial and climatic conditions that prevailed through 
the early phases of the neolithic age in Europe; that is to 
Say, it would be a type of man selectively adapted to the 
technological situation characteristic of the early neolithic 
‘but lacking as yet the domestic animals (and crop- 
plants?) that presently give much of its character to that 
culture. 

_ Beginning, then, with the period of the last severe glaci- 
ation, and starting with this technological equipment, those 
‘portions of the European population that contained an 


1 Reprinted by permission from The University of Missouri 
Bulletin, Science Series, vol. ii, No. 3. 
_ 2“The Mutation Theory and the Blond Race,” in The Journal 
of Race Development, April, 1913. 
477 


478 The Aryan Culture 


appreciable and increasing admixture of the blond may be 
conceived to have ranged across the breadth of Europe 
particularly in the lowlands, in the belt of damp and cod 
country that fringed the ice, and to have followed the re 
ceding ice-sheet northward when the general climate of 
Europe began to take on its present character with th 
returning warmth and dryness. By force of the strict cli 
matic limitation to which this type is subject, the blond 
element, and more particularly the dolicho-blond, wil 
presently have disappeared by selective elimination from 
the population of those regions from which the ice-shee 
and its fringe of cool and humid climate had receded 
The cool and humid belt suited to the propagation of th 
blond mutant (and its blond hybrids) would shift north 
ward and shorten down to the seaboard as the glacia 
conditions in which it had originated presently ceased 
So that presently, when Europe finally lost its ice-sheet 
the blond race and its characteristic hybrids would be 
found confined nearly within the bounds which have 
marked its permanent extension in historic times. Thest 
limits have, no doubt, fluctuated somewhat in response tc 
secular variations of climate; but on the whole they ap 
pear to have been singularly permanent and singularly 
rigid. 

Apparently after the dolicho-blond had come to occup 
the restricted habitat which the stock has since continue 
to hold on the northern seaboard of Europe, toward the 
close of what is known in Danish chronology as th 
“older stone age,” the early stock of domestic animals 
appear to have been introduced into Europe from Asia 
the like statement will hold more doubtfully for the olde 
staple crop plants, with the reservation that their intro 
duction appears to antedate that of the domestic animals 
At least some such date seems indicated by their first ap- 


The Aryan Culture 479 


}pearance in Denmark late in the period of the “kitchen 
|middens.” Virtually all of these essential elements of 
their material civilisation appear to have come to the 
Dlond-hybrid communities settled on the narrow Scandi- 
favian waters, as to the rest of Europe, from Turkestan. 
| This holds true at least for the domestic animals as a 
| Whole, the possible exceptions among the early introduc- 
tions being not of great importance. Some of the early 
‘crop plants may well have come from what is now Meso- 
‘potamian or Persian territory, and may conceivably have 
reached western Europe appreciably earlier, without af- 
| fecting the present argument. If the European horse had 
been domesticated in palzolithic times, as appears at least 
extremely probable, that technological gain appears to 
| have been lost before the close of the palzolithic age; per- 
haps along with the extinction of the European horse. 
These new elements of technological equipment, the 
' crop plants and animals, greatly affected the character of 
the neolithic culture in Europe; visibly so as regards the 
: region presumably occupied by the dolicho-blond,— or the 
blond-hybrid peoples. On the material side of the com- 
munity’s life they would bring change direct and immedi- 
ate, altering the whole scheme of ways and means and 
‘shifting the pursuit of a livelihood to new lines; and on 
the immaterial side their effect would be scarcely less im- 
portant, in that the new ways and means and the new 
“manner of life requisite and induced by their use would 
bring on certain new institutional features suitable to a 
system of mixed farming. Whatever may have been the 
manner of their introduction, whether they were trans- 
mitted peaceably by insensible diffusion from group to 
group or were carried in with a high hand by a new in- 
trusive population that overran the country and imposed 
its own cultural scheme upon the Europeans along with 


480 The Aryan Culture 


the new ways and means of life,— in any case these ney 
cultural elements will have spread over the face of Europ 
somewhat gradually and will have reached the blonc 
hybrid communities in their remote corner of the conti 
nent only after an appreciable lapse of time. Yet, it is t 
be noted, it is after all relatively early in neolithic time 
that certain of the domestic plants and animals first com 
into evidence in the Scandinavian region. 

The crop plants appear to have come in earlier than th 
domestic animals, being perhaps brought in by the people 
of the Mediterranean race at their first occupation o 
Europe in late quaternary time. With tillage necessaril 
goes a sedentary manner of life. So that at their firs 
introduction the domestic animals were intruded into 
system of husbandry carried on by a population living 
settled communities, and drawing their livelihood in grea 
part from the tilled ground but also in part from the se 
and from the game-bearing forests that covered much 0} 
the country at that time. It was into such a situation tha 
the domestic animals were intruded on their first cominj 
into Europe,— particularly into the seaboard region 0 
north Europe. 

On the open ranges of western and central Asia, fron 
which these domestic animals came, and even in the hil 
country of that general region, the peoples that draw thei 
livelihood from cattle and sheep are commonly of a no 
madic habit of life, in the sense that the requirements 0} 
forage for their herds and flocks hold them to an unr 
mitting round of seasonal migration. It results that, ex 
cept in the broken hill country, these peoples habituall 
make use of movable habitations, live in camps rathe 
than in settled, sedentary communities. Certain peculia 
institutional arrangements also result from this nomadi 
manner of life associated with the care of flocks and herd 


The Aryan Culture 481 


large scale But on their introduction into Europe 
e dor t animals appear on the whole not to have sup- 
ieee and given rise to such a nomadic-pastoral 
= of life, exclusively given to cattle raising, but 
er to have fallen into a system of mixed farming 
th combined tillage with a sedentary or quasi-seden- 
ar) grazing industry. Such particularly appears to have 
3 the case in the seaboard region of the north, where 
is no evidence of tillage having been displaced by a 
adic grazing industry. Indeed, the small-scale and 
foken topography of this European region has never 
dmitted a large-scale cattle industry, such as has pre- 
fatled on the wide Asiatic ranges. An exception, at least 
lartial and circumscribed, may perhaps be found in the 
plaims of the extreme Southeast and in the Danube 
; and it appears also that grazing, after the seden- 
lary fashion, took precedence of tillage im prehistoric 
ireland as well as here and there in the hilly countries of 
uthern and central Europe. 
ati Satroduction of tillage and grazing would mean 
evolutionary change in the technology of the European 
2 age, and a technological revolution of this kind will 
avoidably bring on something of a radical change in the 
s oa = of institutions under which the community lives; 
primarily in the institutions governing the details of its 
economic life, but secondarily also im its domestic and 
vil relations. When such a change comes about through 
le intrusion of new material factors the presumption 
= d be that the range of institutions already associated 
h these material factors in their earlier home will 
greatly influence the resulting new growth of institutions 
ithe new situation, even if circumstances may not permit 
these alien institutions to be brought in and put into effect 
With the scope and force which they may have had im the 


482 The Aryan Culture 


culture out of which they have come. Some assimilation 
is to be looked for even if circumstances will not permit 
the adoption of the full scheme of institutions, and the 
institutions originally associated with the intrusive tech 
nology will be found surviving with least loss or qualifica+ 
tion in those portions of the invaded territory where the 
invaders have settled in force, and particularly where 
conditions have permitted them to retain something of 
their earlier manner of life. 

The bringers of these new elements of culture, material 
and immaterial, had acquired what they brought with 
them on the open sheep and cattle ranges of the central- 
Asiatic plains and uplands,— as is held to be the unequiv- 
ocal testimony of the Aryan speech, and as is borne out 
by the latest explorations in that region. These later ex- 
plorations indicate west-central Turkestan as the probable 
center of the domestication and diffusion of the animals, 
if not also of the crop plants, that have stocked Europe. 
Of what race these bearers of the new technology and 
culture may have been, and just what they brought into 
Europe, is all a matter of inference and surmise. It was 
once usual to infer, as a ready matter of course, that these 
immigrant pastoral nomads from the Asiatic uplands were 
“ Aryans,” “ Indo-Europeans,” “ Indo-Germans,” of 
predominantly blond physique. But what has been said 
above as well as in the earlier paper referred to comes 
near excluding the possibility of these invaders being 
blonds, or more specifically the dolicho-blond. It is, of 
course, conceivable, with Keane (if his speculations on 
this head are to be taken seriously), that a fragment of 
the alleged blond race from Mauretania may have wan- 
dered off into Turkestan by way of the Levant, and so 
may there have acquired the habits of a pastoral life, to- 
gether with the Aryan speech and institutions, and may 


The Aryan Culture 483 


then presently have carried these cultural factors into 
Europe and imposed them on the European population, 
blond and brunet. But such speculations, which once 
were allowable though idle, have latterly been put out of 
all question, at least for the present, by the recent Pum- 
_ pelly explorations in Turkestan. It is, for climatic rea- 
sons, extremely improbable that any blond stock should 
have inhabited any region of the central-Asiatic plains or 
uplands long enough to acquire the pastoral habits of life 
_ and the concomitant Aryan speech and institutions, and it 
is fairly certain that the dolicho-blond could not have sur- 
vived for that length of time under the requisite condi- 
tions of climate and topography. 

It is similarly quite out of the question that the dolicho- 
blond, arising as a mutant type late in quaternary time, 
_ should have created the Aryan speech and culture in Eu- 
rope, since neither the archzological evidence nor the 
known facts of climate and topography permit the hy- 
pothesis that a pastoral-nomadic culture of home growth 
has ever prevailed in Europe on a scale approaching that 
_ required for such a result. And there is but little more 
possibility that the bringers of the new (Aryan) culture 
should have been of the Mediterranean race; although the 
explorations referred to make it nearly certain that the 
communities which domesticated the pastoral animals 
(and perhaps the crop-plants) in Turkestan were of that 
race. The Mediterranean race originally is Hamitic, not 
Aryan, it is held by men competent to speak on that mat- 
ter, and the known (presumably) Mediterranean prehis- 
toric settlements in Turkestan, at Anau, are moreover 
obviously the settlements of a notably sedentary people 
following a characteristically peaceable mode of life. 
The population of these settlements might of course con- 
_ ceivably have presently acquired the nomadic and preda- 


484 The Aryan Culture 


tory habits reflected by the Aryan speech and institutions, 
but there is no evidence of such an episode at Anau, where 
the finds show an uninterrupted peaceable and sedentary 
occupation of the sites throughout the period that could 
come in question. The population of the settlements at 
Anau could scarcely have made such a cultural innovation, 
involving the adoption of an alien language, except under 
the pressure of conquest by an invading people; whict 
would involve the subjection of the peaceable communi- 
ties of Anau and the incorporation of their inhabitants as 
slaves or as a servile class in the predatory organisation 
of their masters. The Mediterranean people of Anau 
could accordingly have had a hand in carrying this pas- 
toral-predatory (Aryan) culture into the West only as a 
subsidiary racial element in a migratory community made 
up primarily of another racial stock. 

This leaves the probability that an Asiatic stock, wit 
out previous settled sedentary habits of life, acquired the 
domesticated animals from the sedentary and peaceable 
communities of Anau, or from some similar village 
(pueblo) or villages of western Turkestan, and then 
through a (moderately) long experience of nomadic pas- 
toral life acquired also the predatory habits and insti 
tions that commonly go with a pastoral life on a large 
scale. These cultural traits they acquired in such a de- 
gree of elaboration and maturity as is implied by the 
primitive Aryan (or, better, proto-Aryan) speech, includ 
ing a more or less well developed patriarchal system; so 
that they would presently become a militant and migra- 
tory community somewhat after the later-known Tatar 
fashion, and so made their way westward as a self- 
sufficient migratory host and carried the new material 
culture into Europe together with the alien Aryan speech. 
It is at the same time almost unavoidable that in such an 


The Aryan Culture 485 


|} event this migratory host would have carried with them 
into the West an appreciable servile contingent made up 
primarily of enslaved captives from the peaceable agricul- 
tural settlements of the Mediterranean race, which had 
originally supplied them with their stock of domestic 
animals. 

Along with these new technological elements and the 
changes of law and custom which their adoption would 
bring on, there will also have come in the new language 
that was designed to describe these new ways and means 
of life and was adapted to express the habits of thought 
which the new ways and means bred in the peoples that 
_ adopted them. The immigrant pastoral (proto-Aryan) 
language and the pastoral (patriarchal and predatory) 
law and custom will in some degree have been bound up 
with the technological ways and means out of which they 
arose, and they would be expected to have reached and 
affected the various communities of Europe in somewhat 
the same time and the same measure in which these mate- 
rial facts of the pastoral life made their way among these 
peoples. In the course of the diffusion of these cultural 
elements, material and immaterial, among the European 
communities the language and in a less degree the domes- 
tic and civil usages and ideals bred by the habits of the 
pastoral life might of course come to be dissociated from 
their material or technological basis and might so be 
adopted by remoter peoples who never acquired any large 
measure of the material culture of those pastoral nomads 
whose manner of life had once given rise to these imma- 
terial features of Aryan civilisation. 


Certain considerations going to support this far-flung 
line of conjectural history may be set out more in detail: 
(a) The Aryan civilisation is of the pastoral type, with 


486 The Aryan Culture 


such institutions, usages and preconceptions as a large- 
scale pastoral organisation commonly involves. Such is 
said by competent philologists to be the evidence of the 
primitive Aryan speech. It is substantially a servile or- 
ganisation under patriarchal rule, or, if the expression be 
preferred, a militant or predatory organisation; these al. 
ternative phrases describe the same facts from different 
points of view. It is characterised by a well-defined sys- 
tem of property rights, a somewhat pronounced subjec- 
tion of women and children, and a masterful religious 
system tending strongly to monotheism. A pastoral cul- 
ture on the broad plains and uplands of a continental re 
gion, such as west-central Asia, will necessarily fall into 
some such shape, because of the necessity of an alert and 
mobile readiness for offense and defense and the conse- 
quent need of soldierly discipline. Insubordination, 
which is the substance of free institutions, is incompatible 
with a prosperous pastoral-nomadic mode of life. When 
worked out with any degree of maturity and consistency 
the pastoral-nomadic culture that has to do with sheep and 
cattle appears always to have been a predatory, and there- 
fore a servile culture, particularly when drawn on the 
large scale imposed by the topography of the central- 
Asiatic plains, and reénforced with the use of the horse 
(The reindeer nomads of the arctic seaboard may appear 
to be an exception, at least in a degree, but they are a spe- 
cial case, admitting a particular explanation, and their 
case does not affect the argument for the Aryan civilisa- 


graded servitude, in which no one is his own master but 
the overlord, even nominally. The family is patriarcha 
women and children are in strict tutelage, and discretion 


The Aryan Culture 487 


vests in the male head alone. If the group grows large 
its civil institutions are of a like coercive character, it 
commonly shows a rigorous tribal organisation, and in 
the end, with the help of warlike experience, it almost 
unavoidably becomes a despotic monarchy. 


It has not been unusual to speak of the popular institu- 


_ tions of Germanic paganism — typified, e¢.g., by the Scan- 
dinavian usages of local self-government in pagan times — 


as being typically Aryan institutions, but that is a mis- 
nomer due to uncritical generalisation guided by a chau- 
Vinistic bias. These ancient north-European usages are 


x plainly alien to the culture reflected by the primitive Aryan 
_ Speech, if we are to accept the consensus of the philologi- 


_ cal ethnologists to the effect that the people who used the 
primitive Aryan speech must have been a community of 


pastoral nomads inhabiting the plains and uplands of a 


continental region. That many of these philological eth- 
nologists also hold to the view that these Aryans were 


_north-European pagan blonds may raise a personal ques- 


tion of consistency but does not otherwise touch the pres- 
ent argument. 

(b) A racial stock that has ever been of first-rate con- 
sequence in the ethnology of Europe (the Alpine, brachy- 
cephalic brunet, the homo alpinus of the Linnean scheme) 
comes into Europe at this general period, from Asia; and 


this race is held to have presently made itself at home, if 
_ not dominant, throughout middle Europe, where it has in 
historic times unquestionably been the dominant racial 


—Y¥ 


element. 
(c) The pastoral-nomadic institutions spoken of above 


appear to have best made their way in those regions of 


va 


Europe where this brachycephalic brunet stock has been 
_ present in some force if not as a dominant racial factor. 


_ The evidence is perhaps not conclusive, but there is at 


488 The Aryan Culture 


least a strong line of suggestion afforded by the distribu- 
tion of the patriarchal type of institutions within Europe, 
including the tribal and gentile organisation. There is a 
rough concomitance between the distribution of these cul- 
tural elements presumably derived from an Aryan source 
on the one hand, and the distribution past or present of 
the brachycephalic brunet type on the other hand. The 
regions where this line of institutions are known to have 
prevailed in early times are, in the main, regions in which 
the Alpine racial type is also known to have been present 
in force, as, e.g., in the classic Greek and Roman republics 

At the same time a gentile organisation seems also te 
have been associated from the outset with the Mediter 
ranean racial stock and may well have been comprised in 
the institutional furniture of that race as it stood before 
the advent of the Alpine stock; but the drift of later im- 
quiry and speculation on this head appears to support the 
view that this Mediterranean gentile system was of ¢ 
matrilinear character, such as is found in many extant 
agricultural communities of the lower barbarian culture, 
rather than of a patriarchal kind, such as characterises the 
pastoral nomads. The northern blond communities alone 
appear, on the available evidence, to have had no gentile 
or tribal institutions, whether matrilinear or patriarchal 
The classic Greek and Roman communities appear orig- 
inally to have been of the Mediterranean race and to have 
always retained a broad substratum of the Mediterranean 
stock as the largest racial element in their population, bu 
the Alpine stock was also largely represented in these 
communities at the period when their tribal and gentile 
institutions are known to have counted for much, as, in 
deed, it has continued ever since. 

Apart from these communities of the Mediterraneat 
seaboard, the peoples of the Keltic culture appear to have 


The Aryan Culture 489 


had the tribal and gentile system, together with the patri- 
archal family, in more fully developed form than it is to 
be found in Europe at large. The peoples of Keltic 
“speech are currently believed by ethnologists to have orig- 
‘nally been of a blond type, although opinions are not alto- 
gether at one on that head,— the tall, perhaps red-haired, 
_brachycephalic blond, the “‘ Saxon” of Beddoe, the “ Ori- 
ental” of Deniker. But this blond type is perhaps best 
accounted for as a hybrid of the dolicho-blond crossed on 
the Alpine brachycephalic brunet. Some such view of its 
“derivation is fortified by what is known of the prehistory 
and the peculiar features of the early Keltic culture. 
‘This culture differs in some respects radically from that 
of the dolicho-blond communities, and it bears more of a 
‘Tesemblance to the culture of such a brunet group of 
peoples as the early historic communities of upper and 
“middle Italy. If the view is to be accepted which is com- 
r ing into currency latterly, that the Keltic is to be affiliated 
with the culture of Hallstatt and La Téne, such affiliation 

vill greatly increase the probability that it is to be counted 
“as a culture strongly influenced if not dominated by the 
Alpine stock. The Hallstatt culture, lying in the valley 
of the Danube and its upper affluents, lay in the presumed 
“westward path of immigration of the Alpine stock; its 
‘human remains are of a mixed character, showing a 
strong admixture of the brachycephalic brunet type; and 
it gives evidence of cultural gains due to outside influence 
“in advance of the adjacent regions of Europe. This Kel- 
tic culture, then, as known to history and prehistory, runs 
broadly across middle Europe along the belt where blond 
‘and brunet elements meet and blend; and it has some of 
the features of that predatory-pastoral culture reflected 
by the primitive Aryan speech, in freer development, or 
in better preservation, than the adjacent cultural regions 


4YO The Aryan Culture 


to the north; at the same time the peoples of this Kelti 
culture show more of affiliation to or admixture with th 
brachycephalic brunet than the other blond-hybrid peo: 
ples do. 

On the other hand the communities of dolicho-blon 
hybrids on the shores of the narrow Scandinavian waters 
remote from the centers of the Alpine culture, show litt! 
of the institutions peculiar to a pastoral people. Thes 
dolicho-blond hybrids of the North come into history at 
later date, but with a better preserved and more ade 
quately recorded paganism than the other barbarians o 
Europe. The late-pagan Germanic-Scandinavian cultut 
affords the best available instance of archaic dolicho-blon 
institutions, if not the sole instance; and it is to be note 
that among these peoples the patriarchal system is weal 
and vague,— women are not in perpetual tutelage, the dis 
cretion of the male head of the household is not despoti 
nor even unquestioned, children are not held under patet 
nal discretion beyond adult age, the patrimony is held t 
no clan liabilities and is readily divisible on inheritance 
and so forth. Neither is there any serious evidence of 
tribal or gentile system among these peoples, early or lat 
nor are any of them, excepting the late and special ir 
stance of the Icelandic colony, known ever to have beet 
wholly or mainly of pastoral habits; indeed, they ar 
known to have been without the pastoral animals unt 
some time in the neolithic period. The only dissentin; 
evidence on these heads is that of the Latin writers, sul 
stantially Caesar and Tacitus, whose testimony is doubtles 
to be thrown out as incompetent in view of the fact the 
it is supported neither by circumstantial evidence nor By 
later and more authentic records. In speaking ¢ 
“tribes? among the Germanic hordes these Latin writer 
are plainly construing Germanic facts in Roman terms, 


The Aryan Culture 491 


very much as the Spanish writers of a later day construed 
“Mexican and Peruvian facts in medizval-feudalistic 
terms,—to the lasting confusion of the historians; 
whereas in enlarging on the pastoral habits of the Ger- 
manic communities they go entirely on data taken from 
‘bodies of people on the move and organised for raiding, 
or recently and provisionally settled upon a subject popu- 
lation presumably of Keltic derivation or of other alien 
origin and inhabiting the broad lands of middle Europe 
remote from the permanent habitat of the dolicho-blond. 
Great freedom of assumption has been used and much 
ingenuity has been spent in imputing a tribal system to 
‘the early Germanic peoples, but apart from the sophis- 
ticated testimony of these classical writers there is no 
evidence for it. The nearest approach to a tribal or a 
gentile organisation within this culture is the “ kin,” which 
counts for something in early Germanic law and custom; 
but the kin is far from being a gens or clan, and it will be 
found to have more of the force of a clan organisation 
the farther it has strayed from the Scandinavian center 
of diffusion of the dolicho-blond and the more protracted 
the warlike discipline to which the wandering host has 
been exposed. All these properly Aryan institutions are 
weakest or most notably wanting where the blond is most 
indubitably in evidence. 
_ Taking early Europe as a whole, it will appear that 
among the European peoples at large institutions of the 
character reflected in the primitive Aryan speech and im- 
plied in the pastoral-nomadic life evidenced by the same 
“speech are relatively weak, ill-defined or wanting, arguing 
that Europe was never fully Aryanised. And the peculiar 
‘geographical and ethnic distribution of this Aryanism of 
institutions argues further that the dolicho-blond culture 
of the Scandinavian region was less profoundly affected 


492 The Aryan Culture 


by the Aryan invasion than any other equally well known 
section of Europe. What is known of this primitive 
Aryan culture, material, domestic, civil and religious, 
through the Sanskrit and other early Asiatic sources, may 
convincingly be contrasted with what is found in early 
Europe. These Asiatic records, which are our sole de- 
pendence for a competent characterisation of the Aryan 
culture, shows it to have resembled the culture of the 
early Hebrews or that of the pastoral Turanians more 
closely than it resembles the early European culture at 
large, and greatly more than it resembles the known cu! 
ture of the early communities of dolicho-blond hybrids. 
(d) Scarcely more conclusive, but equally suggestive, 
is the evidence from the religious institutions of the Ar- 
yanised Europeans. As would be expected in any preda- 
tory civilisation, such as the pastoral-nomadic cultures 
typically are, the Aryan religious system is said to have 
leaned strongly toward a despotic monarchical form, ¢ 
hierarchically graded polytheism, culminating in a des- 
potic monotheism. There is little of all this to be found 
in early pagan Europe. The nearest well-known ap- 
proach to anything of the kind is the late-Greek scheme of 
Olympian divinities with Zeus as a doubtful suzerain, 
known through latter-day investigations to have been 
superimposed on an earlier cult of a very different char- 
acter. The Keltic (Druidical) system is little known, but 
it is perhaps not beyond legitimate conjecture, on th 
scant evidence available, that this system had rather more 
of the predatory, monarchical-despotic cast than the bette! 
known pagan cults of Europe. The Germanic paganism, 
as indicated by the late Scandinavian — which alone is 


which imputed little if any coercive power to the highes 
god, and which was not taken so very seriously anywaj 


The Aryan Culture 493 


| by the “ worshipers,”— if Snorri’s virtually exclusive ac- 
count is to be accepted without sophistication. The evi- 
dence accorded by the religious cults of Europe yields 
little that is conclusive, beyond throwing the whole loose- 
jointed, proliferous European paganism out of touch with 
anything that can reasonably be called Aryan. And this 
in spite of the fact that all the available evidence is de- 
_ rived from the European cults as they stood after having 
_ been exposed to long centuries of Aryanisation. So that 
it may well be held that such systematisation of myths 
_ and observances as these European cults give evidence of, 
and going in the direction of a despotic monotheism, is to 
be traced to the influence of the intrusive culture of the 
Aryan or Aryanised invaders,— as is fairly plain in the 
instance of the Olympians. 

(e) That the languages of early Europe, so far as 
known, belong almost universally to the Aryan family 
may seem an insurmountable obstacle to the view here 
spoken for. But the difficulties of the case are not appre- 
ciably lessened by so varying the hypothesis as to impute 
the Aryan speech to the dolicho-blond, or to any blond 
stock, as its original bearer. Indeed, the difficulties are 
increased by such an hypothesis, since the Aryan-speaking 
peoples of early times, as of later times, have in the main 
been communities made up of brunets without evidence of 
a blond admixture, not to speak of an exclusively blond 
people. (There is no evidence of the existence of an 
all-blond people anywhere, early or late.) 

The early European situation, so far as known, offers 
no exceptional obstacles to the diffusion of an intrusive 
language. Certain mass movements of population, or 
rather mass movements of communities shifting their 
ground by secular progression, are known to have taken 
place, as, e.g., in the case of the Hallstatt-La Tene-Keltic 


404 The Aryan Culture 


culture moving westward on the whole as it gained ground 
_ and spread by shifting and ramification outward from its 
first-known seat in the upper Danube valley. All the 
while, as this secular movement of growth, ramification 
and advance was going on, the Hallstatt-La Téne-Keltic 
peoples continued to maintain extensive trade relations 
with the Mediterranean seaboard and the Agean on the 
one side and reaching the North-Sea littoral on the othet 
side. In all probability it is by trade relations of this 
kind — chiefly, no doubt, through trade carried on by 
itinerant merchants — that the new speech made its wa} 
among the barbarians of Europe; and it is no far-fetched 
inference that it made its way, in the North at least, as a 
trade jargon. All this accords with what is going on at 
present under analogous circumstances. The superior 
merit by force of which such a new speech would make its 
way need be nothing more substantial than a relatively 
crude syntax and phonetics — such as furthers the dis- 
semination of English to-day in the form of Chinook 
jargon, Pidgin English, and Beach la Mar. Such traits, 
which might in some other light seem blemishes, facilitate 
the mutilation of such a language into a graceless but 
practicable trade jargon. With jargons as with coins the 
poorer (simpler) drives out the better (subtler and mor 
complex). A second, and perhaps the chief, point of s 
periority by virtue of which a given language makes its 
way as the dominant factor in such a trade jargon, is the 
fact that it is the native language of the people who carry 
on the trade for whose behoof the jargon is contrived. 
The traders, coming in contact with many men, of varied 
speech, and carrying their varied stock of trade goods, 
will impose their own names for the articles bartered and 
so contribute that much to the jargon vocabulary,— and 
a jargon is at its inception little more than a vocabulary. 


The Aryan Culture 495 


} The traders at the same time are likely to belong to the 
} people possessed of the more efficient technology, since it 


| is the superior technology that commonly affords them 
| their opportunity for advantageous trade; hence the new 
or intrusive words, being the names of new or intrusive 
facts, will in so far find their way unhindered into current 
é speech and further the displacement of the indigenous 
KK language by the jargon. 


Such a jargon at the outset is little else than a vocabu- 


| lary comprising names for the most common objects and 


. 
< 


the most tangible relations. On this simple but practi- 
cable framework new varieties of speech will develop, 
diversified locally according to the kind and quantity of 


_ materials and linguistic tradition contributed by the vari- 
_ ous languages which it supplants or absorbs. 


In so putting forward the conjecture that the several 
_ forms of Aryan speech have arisen out of trade jargons 
- that have run back to a common source in the language of 


am intrusive proto-Aryan people, and developing into 
_ widely diversified local and ethnic variants according as 


the mutilated proto-Aryan speech (vocabulary) fell into 
the hands of one or another of the indigenous barbarian 


_ peoples,— in this suggestion there is after all nothing sub- 
_ stantially novel beyond giving a collective name to facts 
already well accepted by the philologists. Working back- 
_ ward analytically step by step from the mature results 


given in the known Aryan languages they have discov- 
ered and divulged — with what prolixity need not be al- 
luded to here—that in their beginnings these several 


idioms were little else than crude vocabularies covering 
_ the commonest objects and most tangible relations, and 
that by time-long use and wont the uncouth strings of 
_ vocables whereby the beginners of these languages sought 
_ to express themselves have been worked down through a 


496 The Aryan Culture 


stupendously elaborate fabric of prefixes, infixes and suf- 
fixes, etc., etc., to the tactically and phonetically unexcep- 
tionable inflected languages of the Aryan family as they 
stood at their classical best. And what is true of the 
European languages should apparently hold with but 
slight modification for the Asiatic members of the family. 
These European idioms are commonly said to be, on the 
whole, less true to the pattern of the inferentially known 
primitive Aryan than are its best Asiatic representatives; 
as would be expected in case the latter were an outgrowth 
of jargons lying nearer the center of diffusion of the 
proto-Aryan speech and technology. | 

As regards the special case of the early north-European 
communities of dolicho-blond hybrids, the trade between 
the Baltic and Danish waters on the one hand and the 
Danube valley, Adriatic and A®gean on the other hand is 
known to have been continued and voluminous during the 
neolithic and bronze ages,— as counted by the Scandina- 
vian chronology. In the course of this traffic, extending 
over many centuries and complicated as it seems to have 
been with a large infiltration of the brachycephalic brunet 
type, much might come to pass in the way of linguistic 
substitution and growth. 


AN EARLY EXPERIMENT IN TRUSTS? 


| Accorp1nc to Much,? following in the main the views of 
_Penka, Wilser, De Lapouge, Sophus Miiller, Andreas 
Hansen, and other spokesmen of the later theories touch- 
ing Aryan origins, the area of characterisation of the 
_ West-European culture, as well as of that dolicho-blond 
racial stock that bears this culture, is the region border- 
ing on the North Sea and the Baltic, and its center of dif- 
fusion is to be sought on the southern shores of the 
Baltic. This region is in a manner, then, the primary 
focus of that culture of enterprise that has reshaped the 
scheme of life for mankind during the Christian era. Its 
spirit of enterprise and adventure has carried this race to 
a degree of material success that is without example in 
history, whether in point of the extent or of the scope 
of its achievements. Up to the present the culminating 
achievement of this enterprise is dominion in business, 
and its most finished instrument is the quasi-voluntary 
coalition of forces known as a Trust. 

In its method and outward form this enterprise of the 
Indo-germanic racial stock has varied with the passage 
_ of time and the change of circumstances; but in its spirit 
and objective end it has maintained a singularly consist- 
ent character through all the mutations of name and 
external circumstance that have passed over it in the 
course of history. 

In its earlier, more elemental expression this enterprise 


1 Reprinted by permission from The Journal of Political Econ- 
_ omy, Vol. XII, March, 1904. 
2MattHagtus Mucu, Die Heimat der Indogermanen. 

497 


498 An Early Experiment 


takes the form of raiding, by land and sea. A shrewd — 
interpretation might, without particular violence to the 
facts, find a coalition of forces of the kind which is later 
known as a Trust in the Barbarian raids spoken of as the 
Volkerwanderung. Such an interpretation would ‘seem ~ 
remote, however, and not particularly apt. The begin- 
nings of a bona fide trust enterprise are of a more busi- 
nesslike character and have left a record more amenable 
to the tests of accountancy. A trust, as that term is 
colloquially understood, is a business organisation. 

Now, the line of enterprise, of indigenous growth in 
the north-European cultural region, which first falls into 
settled shape as an orderly, organised business is the 
traffic of those seafaring men of the North known to 
fame as the Vikings. And it is in this traffic, so far as 
the records show, that a trust, with all essential features, 
is first organised. The term “viking” covers, some- 
what euphemistically, two main facts: piracy and slave- 
trade. Without both of these lines of business the traffic 
could not be maintained in the long run; and both, but 
more particularly the latter, presume, as an indispensable 
condition to their successful prosecution, a regular market 
and an assured demand for the output. It is a traffic in 
which, in order to get the best results, a relatively large 
initial investment must be sunk, and the period of turn 
over —the “period of production ”’—is necessarily of 
some duration; the risk is also considerable. Further, 
certain technological prerequisites must be met, in the 
way particularly of shipbuilding, navigation, and th 
manufacture of weapons; an adequate accumulation of 
capital goods must be had, coupled with a sagacious spirit 


labor. There appears to have been a concurrence of all 
these circumstances, together with favorable market con 


a An Early Experiment 499 


ditions, in the south-Baltic region from about the sixth 
century onward; the circumstances apparently growing 
gradually more favorable through the succeeding four 
_ centuries. 

The viking trade appears to have grown up gradually 
on the Baltic seaboard, as well as in the Sound country 
_ and throughout the fjord region of Norway, as a by- 
_ occupation of the farming population. Its beginnings are 
than any records, so that the earliest traditions 

speak of it as an institution well understood and fully 
legitimate. The well-to-do freehold farmers, including 
some who laid claim to the rank of jarl, seem to have 
found it an agreeable and honorable diversion, as well 
as a lucrative employment for their surplus wealth and 
labor supply. From such sporadic and occasional be- 
_ ginnings it passed presently into an independently organ- 
ised and self-sustaining line of business enterprise, and 
"in the course of time it attained a settled business routine 
and a defined code of professional ethics. Syndication, 
_ of a loose form, had begun as early as the oldest accounts 
extant, but it is evident from the way in which the 
matter is spoken of that combination had not at that 
date — say, about the beginning of the ninth century — 
_ long been the common practice. It was not then a mat- 
ter of course. The early combinations were relatively 
small and transient. They took the form of “ gentle- 
_ men’s agreements,” pools, working arrangements, divi- 
4 


op VQ 44 


sion of territory, etc., rather than hard and fast syndi- 
Cates. In those early days a combine would be formed 
_ for a season between two or more capitalist-undertakers, 
for the most part employing their own capital only, with- 
‘out recourse to credit; although credit arrangements oc- 
“cur quite early, but are not very common in the earlier 
_tecorded phases of the trade. Such a loose combine, say 


“f 


aN fame 


500 An Early Experiment 


about the middle of the ninth century, might comprise 
from two to a dozen boats. What may be called the 
normal unit in the trade at that time was a boat of pe 
haps thirty tons’ burden, with an effective crew of some 
eighty men. Boats and crews gradually increase both 
in size and efficiency for a century and a half after that 
time. 

Syndication, of an increasingly close texture and in- 
creasingly permanent effect, appears to have rapidly 
grown in favor through the ninth and tenth centuries. 
The reasons for this movement of coalition are plain. 
The volume of the trade, as well as its territorial exten- 
sion, increased uninterruptedly. The technique of the 
trade was gradually improved, and the equipment and 
management were improved and reduced to standard 
forms. The tonnage employed at any given time can, of 


approximation; but its steady increase is unmistakable. 
Year by year the boats and crews increase in average 
size as well as in number, until by the middle of the 
tenth century the number of men and ships engaged, as 
well as the volume of capital invested in the trade, are 
probably larger than the corresponding figures for amy 
other form of lucrative enterprise at that time. It is, 
at that time, altogether the best-organised line of enter- 
prise in the West-European region in respect of its busi- 
ness management, and the most efficient and progressive 
in respect of its equipment and technology. At a com 
servative guess, the aggregate number of ships engaged 
about the middle of the tenth century must have appre- 
ciably exceeded six hundred, and may have reached one 
thousand; with crews which had also grown gradually 
larger until they may by this time have averaged 15¢ 
or 200 men. There was consequently what would in 


An Early Experiment 501 


| modern phrase be called an “ overproduction ” of pirat- 
"ical craft — overinvestment in the viking trade and con- 
sequent cut-throat competition. The various coalitions 
| came into violent conflict, and many of them went under, 
_ with great resultant loss of capital, impoverishment of 
well-to-do families, hardship and demoralisation of the 
_ entire trade. 

Added to these untoward conditions within the trade 
was the open disfavor of the crown, in each of the three 
_ Scandinavian kingdoms. The traffic had long passed out 
_ of the stage at which it had offered a lucrative opening 
for farmers’ sons who were tired of the farm and eager 
to find excitement, reputation, and creature comforts in 
that wider human contact and busier life for which the 
tedium of the farm had sharpened their appetites. The 
larger capitalists alone could succeed as organisers or 
directors of a viking concern under the changed condi- 
tions. The common run of well-to-do farmers had 
neither the tangible assets nor the “ good-will” requisite 
to the successful promotion of a new company of free- 
booters. At the best, their sons could enter the business 
_ only as employees and with but a very uncertain outlook 
to speedy promotion to an executive position. On the 
other hand, as the trade became better organised in 
stronger hands, with a larger equipment, and as the com- 
petition within the trade grew more severe, the black- 
mail from which much of the profits of the trade was 
drawn grew more excessive and more uncertain, both as 
_ to its amount and as to the manner and incidents with 
which it was levied. As competition grew severe and 
the small vikings practically disappeared, and as the 
demoralisation that goes with cut-throat competition set 
in, the livelihood of the common people, at whose expense 
the vikings lived, grew progressively more precarious, and 


502 An Early Experiment 


even their domestic peace and household industry grew 
insecure. Popular sentiment was running strongly 
against the whole traffic. So much so, indeed, as ta 
threaten the tenure of courts and sovereigns if the pop- 
ular hardship incident to the continuance of the trade 
were not abated. ' 

The politicians, therefore, made a strenuous show of 
effort to regulate, or even to repress, the viking organi 
sations. Outright and indiscriminate repression was 
scarcely a feasible remedy, certainly not an agreeable 
one. The viking companies were a source of strength 
to the country, both in that they might be drawn on for 
support in case of war and in that they brought funds 
into the country. The remedy to which the politicians 
turned, by preference, therefore, was a regulation of the 
companies in such a manner as to let “ the foreigners pay 
the tax,” to adapt a modern phrase. If the freebooters 
of a given state could be induced, by stringent regulations, 
to prey upon the people of the neighboring states, and 
particularly if they worked at cross-purposes with similar 
companies of freebooters domiciled in such neighboring 
states, it was then plain to the sagacious politicians of 
those days that the companies might be more of a bless- 
ing than a curse. On trial it was found that this policy 
of control gave at the best but very dubious results, and 
consequently the repressive hand of the authorities per- 
force fell with increasingly rigorous pressure on the vi- 
king organisations, particularly on the smaller ones which 
were scarcely of national importance. The competition 
in the trade was too severe to admit of a consistent avoid- 
ance of excesses and irregularities on the part of the 
vikings, and these irregularities obliged the authorities to 
interfere. 

Under these circumstances it is plain that no viking 


An Early Experiment 503 


combine could hope to prosper in the long run unless it 
were strong enough to take an international position and 
to maintain a practical monopoly of the trade. “‘ Inter- 
national” in these premises means within the Scandina- 
vian countries. In the days of its finest development the 
viking trade was domiciled in the Scandinavian countries, 
almost exclusively. This means the two Scandinavian 
peninsulas, with Iceland, the Faroes, Orkneys, Hebrides, 
and the Scandinavian portions of Scotland. To this, for 
completeness of statement, is to be added a stretch of 
Wendish seaboard on the south of the Baltic and a neg- 
ligible patch of German territory. The trade, so far as 
regards its home offices, to use a modern phrase, gath- 
ered in the main about two chief centers: the Orkneys 
and the south end of the Baltic. Outlying regions, such 
as the Norwegian fjord country and the Hebrides, are 
by no means negligible, but the two regions named above 
are after all the chief seats of the traffic; and of these 
two centers the Baltic — chiefly Danish — region is in 
many respects the more notable. Its viking traffic is bet- 
ter, more regularly organised, is carried on with a more 
evident sense of a solidarity of interests and a more con- 
sistent view to a long-term prosperity. As one might 
say, looking at the matter from the modern standpoint, 
it has more of a look of stability and conservative man- 
agement, such as belongs to an investment business, and 
has less of a speculative air, than the trade that centers 
in the western isles. 

Perhaps it is just on this account, because of its greater 
stability of interests and more conservative animus, that 
the traffic of this region responds with greater alacrity 
to the pressure of excessive competition and political in- 
-terference, and so enters on a policy of larger and closer 
coalition. It may be added that many of the great 


504 An Early Experiment 


captains of adventure in this region are men of gooc 
family and substantial standing in the community. A 
may often happen in a like conjuncture, when the irk 
someness of this competitive situation in the Baltic was 
fast becoming intolerable, there arose a man of far-seeing 
sagacity and settled principles, of executive ability and 
businesslike integrity, who saw the needs of the hour anc 
the available remedy, and who saw at the same glance 
his own opportunity of gain. This man was Palnatoki 
the descendant of an honorable line of country gentle 
men in the island of Funen, whose family had from 
time immemorial borne an active and prudent part in the 
trade, and had been well seen at court and in society. 
He was a man of mature experience, with a large invest- 
ment in the traffic, and with a body of “ good-will” that 
gave him perhaps his most decisive advantage. 

During the reign of Harald Gormsson, about the mid- 
dle of the tenth century, Palnatoki seems to have cast 
about for a basis on which to promote an international 
coalition of vikings, such as would put an end to hea d- 
long competition in the trade and would at the same time 
be placed above the accidents of national politics. To 
this end it was necessary to find a neutral ground on 
which to establish the home office of the concern. Suck 
a medizval-Scandinavian New Jersey was the Wendish 
kingdom at the south of the Baltic. i 

Jomsborg (on the island of Wollin, at the mouth of 
the Oder) seems to have been a resort of vikings befot 
Palnatoki organised his company there and strengthene 
the harbor, which may have been fortified by those who 
held it before him. Here the new company was incor: 
porated under a special franchise from the Wendis! 
crown, with the stipulation that it was to do business only 
outside the Wendish territories. The tangible assets of 


An Early Experiment 505 


the corporation were the harbor and fortified town of 
Jomsborg, together with the ships and other equipment 
of such vikings as were admitted to fellowship; its in- 
tangible assets were its franchise and the good-will of 
the promoter and the underlying companies. Its by-laws 
were very strict, both as to the discipline of the personnel 
and as to the distribution of earnings. The promoter, 
who was the first president of the corporation, was given 
extreme powers for the enforcement of the by-laws, and 
throughout his long incumbency of office he exercised 
his powers with the greatest discretion and with a most 
salutary effect. 

This neutral, international corporation of piracy rap- 
idly won a great prestige. In modern phrase, its intan- 
gible assets grew rapidly larger. Backed by the com- 
petitive pressure which the new corporation was able 
to bring upon the smaller companies and syndicates, this 
prestige of the Jomsvikings brought a steady run of ap- 
plications for admission into the trust. The trust’s pol- 
icy was substantially the same as has since become fa- 
miliar in other lines of enterprise, with the difference that 
in those early days the competitive struggle took a less 
sophisticated form. Outstanding syndicates and private 
firms were given the alternative of submission to the 
trust’s terms or retirement from the traffic. There was 
great hardship among the outstanding concerns, espe- 
cially among that large proportion of them that were 
unable to meet the scale of requirements imposed on ap- 
plicants for admission into the trust. The qualifications 
both as to equipment and personnel were extremely strict, 
so that a large percentage of the applicants were ex- 
cluded; and the unfortunates who failed of admission 
found themselves in a doubtful position that grew more 
precarious with every year that passed. Practically, such 


506 An Early Experiment 


concerns were either frozen out of the business or fore 
into a liquidation which permanently wound up — 
affairs and terminated their corporate existence. 

The accounts extant are of course not reliable in minute 
details, being not strictly contemporary, nor are they 7 
in such modern terms as would give an easy compatis 
with present-day facts. The chief documents in th 
are Jémsvikingasaga, Saxo Grammaticus, Heimsk 
and Olafssaga Tryggvasonar; but nearly the wh 
the saga literature bears on the development of the 
trade, and characteristic references to the Jomsviki 
trust occur throughout. The evidence afforded by 1 
accounts converges to the conclusion that toward 
close of the tenth century the trust stood in a high 
of prosperity and was in a position virtually to dic 
the course of the traffic for all that portion of the viki 
trade that centered in the Baltic. Its prestige and i 
ence were strong wherever the traffic extended, eve 
the region of the western isles and in the fjord cout 
of Norway. It had even come to be a factor of firs 
rate consequence in international politics, and its po 
was feared and courted by those two sovereigns © 
established the Danish rule in England, as well as 
their Swedish, Norwegian, and Russian contempora 
It is probably not an overstatement to say that the Dai 
conquest of England would not have been practicable 
cept for the alliance of the trust with Svend, which e1 
abled him to turn his attention from the complications of 
Scandinavian politics to his English ‘interests. 

The extent of the trust’s material equipment at + 
height of its prosperity is a matter of surmise rather - 
of statistical information. Some notion of its strer 
may be gathered from the statement that the forti 
harbor of JOmsborg included within its castellated sea- 


An Early Experiment 507 


wall an inclosed basin capable of floating three hundred 
ships at anchor. In the great raid against the kingdom 
of Norway, whose failure inaugurated the disintegration 
of the trust, the number of ships sent out is variously 
given by different authorities. The Jémsvikingasaga says 
that they numbered one long hundred. This fleet, how- 
ever, was made up of craft selected from among the ships 
that were under the immediate command of four of the 
great captains of adventure. The fleet, as it lay in the 
Sound before the final selection, is said to have num- 
bered 185, but the context shows that this fleet was but 
a fraction of the aggregate JOmsviking tonnage. Of this 
disastrous expedition but a fraction returned; yet vari- 
ous later expeditions of the Jomsvikings are mentioned 
in which some scores of their ships took part. 

The trust having become an international power, it 
undertook to shape the destiny of nations and dynasties, 
and it broke under the strain. It, or its directors, took a 
contract to bring Norway into subjection to the Danish 
crown. Partly through untoward accidents, partly 
through miscalculation and hurried preparations, it failed 
in this undertaking, which brought the affairs of the trust 
to a spectacular crisis. From this disaster it never re- 
covered. With the opening of the eleventh century the 
viking trust fell into abeyance, and in a few years it 
disappeared from the field. There are several good rea- 
sons for its failure. On the death of its founder the 
management had passed into the hands of Sigvaldi, a 
man of less sagacity and less integrity as well as of more 
unprincipled personal ambition, and somewhat given to 
flighty ventures in the field of politics. It was Sigvaldi’s 
overweening personal ambition that committed the cor- 
poration to the ill-advised expedition against Norway. 
The trust, moreover, being supreme within its field, the 


508 An Early Experiment 


discipline grew lax and its exactions grew arbitrary, 
sometimes going to unprovoked excesses. As one might 
say, too little thought was given to “ economies of pro- 
duction,” and the charges were pushed beyond “ what 
the traffic would bear.” But for all that, in spite of its” 
meddling in politics, and in spite of jobbery and corrup- 
tion in its management, the trust still had a fair outlook 
for continued success, except that the bottom dropped out 
of the trade. For better or worse, the slave-trade in 
the north of Europe collapsed on the introduction of 
Christianity, at least so far as regards the trade in Chris- 
tians; and without a slave market the viking enterprise 
had no chance of reasonable earnings. At the same time, — 
the risk and hardships of the traffic—the “cost of pro- 
duction ”’— grew heavier as the countries to the south 
became better able to defend their shores. The passenger 
traffic failed almost entirely, and the goods traffic was in 
a disorganised and unprofitable state. The costs were 
fast becoming prohibitive, even to men so enterprising 
and necessitous as the Norwegian freebooters. The situ- 
ation changed in such a way as to leave the trust out. 
Some show of corporate existence was still maintained ~ 
for a short period after the trust’s great crisis, but there — 
was an end of discipline and authoritative control. The 
minor concerns and private establishments that had once 
formed part of the trust continued in the trade on an in- 
dependent footing, but with decreasing regularity and 
with diminishing strength. As the equipment wore out 
it was not replaced, and the trade lapsed. The great cap- 
tains of the industry, like Sigvaldi, Thorkel Haraldson, - 
Sigurd Kapa, and Vagn Akason, turned their holdings to 
the service of the dynastic politics which were then en- 
gaging the attention of the northern countries. Much of 
this body of enterprise and wealth was exhausted in work- — 


An Early Experiment 509 


e Great; and what was left over shared the 
ae the other available forces of the Scandinavian 
ntries, being dissipated in political dissensions, extor- 


yvernment organisations, and the establishment 
_and a nobility. 


THE END 


ee rr 


rt ee Sy ee Al £ 


Tr 


Y395P ¢.2 190870. 


SS ee — ee ne ae eas 
SS SS meneon = 


Se a a 
: SSS 
5 ————— 
SSS 
SS SSS 


